Clients 08 People 16 Firm 22 Financial 34 Global 70 …...strategic support, risk management, outsourcing advisory. Business Recovery Corporate insolvency, solutions for discontinued

05PricewaterhouseCoopers LLP Annual Report 2005

www.pwc.com/uk

Annual R

eport 2005

Chairman 02

Clients 08

People 16

Firm 22

Financial 34

Global 70

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www.pwc.com/uk

Annual R

eport 2005

Chairman 02

Clients 08

People 16

Firm 22

Financial 34

Global 70


Assurance and Regulatory ReportingStatutory audit, financial accounting, non-financialperformance and reporting, regulatory compliance, internalaudit, International Financial Reporting Standards (IFRS)readiness and conversions, Sarbanes-Oxley readiness,independent controls and process assurance, assuranceon capital market transactions, sustainability.

TaxCorporate tax advisory, tax on transactions, transfer pricing,corporate and international tax structuring, finance andtreasury, indirect taxes, tax investigations, corporate taxcompliance and outsourcing, company administrationservices, personal tax advisory and compliance, tax valuations.

Performance Improvement ConsultingFinance and IT effectiveness, revenue enhancement,operational improvement, cost reduction, supply chain,shared services, treasury, project and change management,strategic support, risk management, outsourcing advisory.

Business RecoveryCorporate insolvency, solutions for discontinued insurancebusiness, personal insolvency, financial restructuring, crisisand stakeholder management, corporate simplification,independent business reviews, interim leadership, optimisedexit services, receivables management.

Transaction ServicesBid support and defence, buy and sell side financialdue diligence, commercial and market due diligence,post-deal services, structuring.

Corporate Finance Mergers and acquisitions advisory, private equity advisory,initial public offerings, project finance and public privatepartnerships, public to private, valuations.

Human Resource ServicesReward and compensation, employment services, retirement,benefits and actuarial, international assignment solutions,HR transaction services, human capital benchmarking,HR strategy and business effectiveness.

ActuarialMergers and acquisitions, capital structuring, financialmodelling, insolvencies and run-off solutions, regulatory, risk and capital management, underwriting, claims andreinsurance, insurance reserving and reporting, retirementand benefits, process improvement.

Forensic ServicesAnti-money laundering, capital projects, commercialdisputes, forensic technology solutions, investigations,insurance claims, intellectual property, internationalarbitration, licensing management, securities litigationtransaction and shareholder disputes and investigations.

We connect our people, network, experience, industryknowledge and business understanding to build trustand create value for our clients.*

How we measure ourselvesOur ambition is to continue to be the UK’s leadingprofessional services firm and a key contributorto and beneficiary of the PwC global network.

We are committed to helping our clients, our people and our communities develop and grow.

Clients

People

Firm

Financial

Being a great place to workTo achieve our goals we need to have the right people. So we seek to attract, recruitand invest in the most capable and innovative people, create an environment in whichthey can develop their full potential, and nurture their knowledge and experience.We then strive to connect all these attributes and share our collective expertise for the benefit of our clients.

Leading in each of our chosen marketsOur aim is to be the acknowledged leader in all our chosen markets, both in termsof our work for clients and the values by which we live. Quality and integrity lie at theheart of everything we do, be it in creating, delivering and adding value for our clientsor fulfilling our public interest responsibilities through rigorous and independent auditing.

Creating a sustainable businessWe are committed to enhancing and protecting our brand and reputation. This notonly means communicating openly and transparently both within and beyond ourorganisation, but also investing in our infrastructure and technology to ensure theycontinue to support the changing needs of our clients and our people. We recogniseour responsibilities to the wider communities in which we operate and to the globalPricewaterhouseCoopers network, of which we are an important member.

Maintaining quality earningsOur aim is to maintain quality earnings which are proportionate to the risks weencounter in our business while also being sufficient to provide adequate resourcesfor investment and reward for all our people.

© 2005 PricewaterhouseCoopers LLP. All rights reserved. ‘PricewaterhouseCoopers’ and ‘PwC’ refer to PricewaterhouseCoopers LLP (a limited liability partnershipregistered in England) or, as the context requires, other member firms ofPricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark ofPricewaterhouseCoopers LLP (US).

Unless otherwise indicated, either expressly or by the context, we use the word‘partner’ to describe a member of PricewaterhouseCoopers LLP.

Registered office: 1 Embankment Place, London, WC2N 6RH.

Registered number: OC 303525.

Designed by studio ec4.

Production by Tor Pettersen & Partners.

Printed in the UK by St Ives Westerham Press.

Main section photography by Bill Robinson.

This report is printed on Revive Special Silk. At least 30% of the total fibre contentcomes from well-managed forests independently certified according to the rules of theForest Stewardship Council, and 30% is from post-consumer recycled waste paper.

What we doWe provide assurance, tax and advisory services.

Our clients include public and private companies, centraland local government, banks and private equity houses,private individuals and not-for-profit organisations.

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Clients

People

Firm

Financial

















Assurance Tax Advisory

05

Turnover£m

1,780

1,583

1,503

514 405861

373478732

344497662

04

03

05

04

03

Partner and staff numbersat 30 June

14,850

14,000

14,100

Represents the average personal capitaland undistributed profits invested in thebusiness per partner at 30 June.

05

Average investment by partners£000

738

619

584

04

03

05

Average profit per partner£000

620

531

483

04

03

How we performedOur position as market leader was further reinforced in 2005.

We continued to bring real value to our clients, invest in ourpeople, support our local communities, shape our industry,build trust and enhance value.

Clients

• Record Assurance services growth driven partly by IFRS and Sarbanes-Oxley• 46% of turnover arose from non-audit clients• Tax returned to healthy growth• Independently assessed as most effective firm in middle market• Performance Improvement Consulting grew 28%

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People

• 95% are proud to work at PwC• Only 12% of people chose to leave us, the lowest rate on record• Voted UK’s number one graduate employer• 21% of graduate recruits from ethnic minority backgrounds

Firm

• Awarded top Corporate Responsibility ranking for professional services firms• 700 staff received funding for their volunteer organisations, a 40% increase• Highly commended by Business in the Community for Impact on Society• Major training programmes rolled out to reinforce regulatory compliance• Chairman re-elected for a second term

Financial

• Turnover rose over 12% to nearly £1.8bn• Staff bonuses increased by 42% to £52m• Average profit per partner up 17% to £620,000• Strong balance sheet with net assets up 20% to over £0.5bn

All information relates to continuing operations, with prior year financial data restated to conform to the current year presentation (see note 1 to the financial statements).

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Leadership*Teamwork and excellence in all that we do

Kieran Poynter, ChairmanPricewaterhouseCoopers

Chairman

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wins in all our major markets, includinglarge UK and mid cap Plcs, privatecompanies and private clients. OurPerformance Improvement Consultingpractice showed particularly strong growth.We were recently ranked as the UK’s 11thlargest consultancy business, with most of those ahead of us in that listing beingproviders of big ticket IT consulting andoutsourcing which are activities in whichwe have chosen not to engage.

We expanded our presence in the middlemarket, which is the largest sector in the UK economy and in our client base.We invested in our regional offices andservices and reinforced our commitmentto this sector through a national advertisingcampaign which introduced many morepotential clients to our services.

The public sector remains an importantand growing part of our business,accounting for some 9% of turnover.In the past year we have assisted ourclients to achieve greater efficiency inmeeting government targets and risingconsumer expectations for consistencyof service delivery and more choice.

Great place to workAs I have said in the past, it is clearto me that the long-term sustainablesuccess of PricewaterhouseCoopers will be delivered only by making this a great place to work for all our people.This in turn will deliver differential qualityto everything we do in the marketplace.

Our overriding focus on our people hasmeant that we can continue to recruitthe very best graduates and experiencedprofessionals. We continue to be employer

This has been a year of great achievementand of real progress in all aspects of ourbusiness. Leadership in our market place,outstanding growth and continuedrecognition of our great place to work andcorporate responsibility agendas werematched by record financial results. I wantto thank all our people for their dedicationand hard work that has resulted in thisenviable performance.

Leading in our marketplaceIt is clear that adherence to a simplewinning strategy – of leading in each ofour chosen markets based on quality andbeing a great place to work – is paying off.This year more clients came to us forservices, drawing on the skills andknowledge of our people, as well as ourability to tap into our network for extensivebusiness understanding, industryknowledge, experience and solutions.

In a buoyant marketplace we performedstrongly across the board. The impact ofIFRS and, for our SEC clients, Sarbanes-Oxley gave rise to a surge of growth forour Assurance business though this isunlikely to be repeated. This level ofassurance activity has had twoconsequences: the first was that weexperienced some resourcing challenges,which we successfully overcame, and thesecond was that we saw our Assurancerevenues increase although our marginsdid not. Over the past couple of years ourTax business has suffered from changedbuying patterns, particularly in respect of US audit clients. I am therefore verypleased with its bounce back to stronggrowth on the back of a clear market focuswhich has resulted in significant new client

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Assurance

What our clients think of us

Satisfaction with our responsiveness and attention to client requests

05

04Tax

05

04Advisory

05

04

Assurance 05

04Tax

05

04Advisory

05

04

Source: PwC Client Satisfaction Survey – contains opinions of 3,039 (2004: 2,488)PricewaterhouseCoopers clients rated on a scale of one to ten (where one is low and ten is high)

How well our people relate with clients

8.3

8.3

8.6

8.4

8.7

8.7

8.4

8.4

8.7

8.5

8.7

8.8

1

Chairman

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Enhancing value for our clients,people and the community

of choice for talented individuals froma variety of backgrounds.

We have created an environment wherepeople get tremendous training anddevelopment opportunities. Of course, wehave to ensure this continues and we willbe investing heavily in the coming yearsto keep our training and developmentprogrammes at the leading edge.

This is not just rhetoric. We try to ensureour behaviour matches our policies byregularly asking our people to tell us howwe are doing. In our most recent survey87% of our people said they believe ourfirm is serious about making PwC a greatplace to work, 95% were proud to workhere and 86% would recommend a friendto join us. These are remarkable resultsby any measure. Although proud of thisachievement, we are conscious of thecontinuing effort needed by everyone in order to sustain it.

I reported last year that we were makingsome progress on work/life balance.This is a big issue for a busy professionalservices firm such as ours and we havemade further progress this year. However,we know from our surveys that we haven’tgot it totally right yet and we will continueto find ways of being more flexible.

We also made progress in our ambitionto increase diversity in our firm. Thisremains a priority not simply becauseit is the right thing to do, but becauseit makes sound business senseto maximise innovation by harnessingdiverse talents.

There has been a hot market over the lastyear for those with the quality and skills

our people exhibit. Accordingly the acidtest of our people policies is staffturnover. We are pleased therefore to see that our staff turnover has reduced to record low levels this year as morepeople choose to stay and make theircareer with us.

Corporate responsibilityWe recognise and embrace our obligationsto enhance value not only for our clients,our partners and our people but also forour other stakeholders: those in thecommunities where we work and live.

I am pleased to report increasing interestamongst our people in actively engagingin community activities, with strongsupport from the firm as we continue ourlong-standing commitment to improvingour impact on the environment and thelocal communities surrounding our offices.

We also support the wider businesscommunity by providing skilledindividuals and leadership to manyprofessional and business organisations.

Whilst our commitment is not new, we received external recognition of our approach to corporate responsibilityby being ranked 5th in the 2004Business in the Community CorporateResponsibility Index.

Building Public TrustWe continue with our campaign to improvethe quality of public reporting by telling it how it is. This culminates in our annualBuilding Public Trust Awards. This eventhas established itself as the showcase fororganisations committed to transparencyin their corporate reporting.

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PwC team receiving Highlycommended for our Impact onSociety Award at the Business in theCommunity Awards for excellence


In audit, as in everything we do, ourcommitment to quality and integrity isparamount. We will work with preparersand users of accounts, as well as withstandard setters and regulators, to ensurethat the financial reporting model isproviding reliable and relevant informationto the market. This information, properlyaudited, will give the necessary confidenceto the UK capital market, for the good of all.

RegulationLast year I welcomed the UK government’smeasured response to regulatory reformand the introduction of independentregulation of the auditing professionthrough the Financial Reporting Council.While it is too early to judge the successof the new regime we welcome anythingthat improves audit quality.

In common with all other businesses we have to comply with a welter ofregulation and I believe the UK’scompetitiveness would be improved byreducing the regulatory burden generally.

Liability reformIt is essential that we have an appropriatelegal and regulatory environment if we areto be able to audit those companies which,for whatever reason, place us at significantrisk. Significant risk arises for auditorsfrom the sheer scale of some enterprises,from the risk characteristics of theirbusiness or from their choice to exposethemselves, and thus their auditors, tohostile litigation environments such asthe USA. We recognise that it is thesevery companies which the public interestand the capital markets require to be

6 www.pwc.com/uk

subject to robust, independent audit.Auditing companies that representsignificant risk is an unsustainable long-term proposition in the present legal liability environment.

The case for liability reform to protectauditors of large enterprises is thus bothurgent and overwhelming. Put simply,none of the audit firms, including us asthe largest, has the financial resourcesto cope with massive negligence claimsnor can we insure against the risk of such claims. There is no argumentagainst reform which I have seen thatstands up to analysis.

Against this background, we thereforewelcome the UK government’s decision to legislate to allow auditors and theirclients to agree proportionate liability bycontract subject to shareholder approval.However, this is not enough. A liability capfor those that audit the largest enterprisesto protect against catastrophic claims must be part of the solution. Accordingly, I welcome the emerging view in Europethat the Commission should be encouragedto bring forward reform proposals nextyear and I hope that the UK governmentwill support this. I also hope that thereform will be enacted before one or moreof the large firms is driven out of businessor chooses to withdraw from the top endof the audit market.

Financial performanceOur financial results demonstrate that ourstrategy is working. Turnover at £1.8 billionwas up by 12% compared with an increaseof 5% in the previous year, with all partsof the business performing stronglyin their respective markets.

Chairman

UK Economic Outlook is producedby the PricewaterhouseCoopersMacroeconomics Unit, whichprovides advice on the implicationsof macro-economic trends andeconomic policy developments

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We continued to retain tight control overcosts, whilst suffering sharp rises fromthe increasing burden of regulation.We also continued to invest in recruitingand training talented people to handlethe growth in the business, in particularin Performance Improvement Consultingand the spike in activity arising from thedemands of IFRS and Sarbanes-Oxley.

Profit available for distribution to memberswas up 17% at £468m. Averagedistributable profit per member also roseby 17% to £620,000, compared with£531,000 in 2004.

This profit was struck after bonuses to stafftotalling £52m, up 42% on the year before.

Looking aheadIn common with many commentators,I think we may see a modest reductionin the rate of growth in the UK economyduring 2006. However, the economicclimate is still one in which I believe wecan thrive. There are real opportunities forus to continue to help our clients, developour people and to achieve sustainable,profitable growth.

Our strategy is working

Our newly admitted partners for 2005 pictured here with Kieran Poynter and our partner development team

I look forward with confidence to theyear ahead.

Kieran Poynter, Chairman

[email protected] August 2005


Value*Exceeding our clients’ expectations

Our Wincanton clientsNigel Sullivan and Nicci Evansworking with Mark Ellis, Paul Heal and Ritchie Tout

Clients

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10 www.pwc.com/uk

The firm has enjoyed strong real growththis year. Business conditions continuedto be favourable and although part of our success was driven by the increasinglycomplex regulatory environment, sustainedrevenue growth from non-audit clientswas also a major contributor.

Growth was particularly strong inAssurance services due partly to theimpact of IFRS and Sarbanes-Oxley, inPerformance Improvement Consultingand in the South East and Scotland. Taxservices recovered to good growth ratesin all but the inbound corporate sector.In the public sector, high growth ratesin the early part of the financial yearslowed down considerably in the run-upto the General Election. Non-audit servicesto audit clients returned to limited growthfollowing a period of adjustment dueto changes in the buying patterns ofsome clients in response to regulation.

All parts of the business are nowperforming strongly in their respectivemarketplaces. Next year some of thisyear’s Sarbanes-Oxley s404 and IFRSwork will not recur and the high growthrates from non-audit clients are likely toslow. Whilst we still expect our businessto perform well, we expect a reduction in our growth rate in the comingfinancial year.

The strength of the PwC brand continuesto stand us in good stead in themarketplace. We express what we standfor by the phrase Connected Thinkingwhich describes the way we work andthe type of experience we believe ourclients should expect when we work withthem. We also see an inextricable link

between our strategy of being a greatplace to work and market success.

We monitor client satisfaction and,against our overall target score of eightout of ten, the average score from the3,039 (2004: 2,488) client satisfactionreturns received was 8.2 (2004: 8.2).

Our clients, regulators, government andthe general public continue rightly toexpect that we will uphold the highestvalues of integrity and ethics in the waywe run our own business, and in theadvice we provide. In turn we encourageorganisations to enhance their reportingto their stakeholders. Our annual BuildingPublic Trust Awards celebrate thoseorganisations, in both the private andpublic sector, who demonstrate a realcommitment towards transparency intheir corporate reporting. We alsosponsor the annual CIPFA PublicReporting and Accountability Awards.During the last year, we extended ourfocus to the economic contributioncompanies make to society throughtaxation and for the first time our firm’sTotal Tax Contribution is included in theFinancial section of this annual report.

Expanding our presencein the middle marketMiddle market companies remain thelargest single component of our clientbase. Our regional practices had anothervery strong year, largely as a result ofsustained and focused investment. Wesaw good growth across all regions withthe South East and Scotland deliveringparticularly strong results.

12per cent growthin turnover

Clients

03 04

Service analysis

740

843

Audit clientsNon-Audit clients

650

853

05

828

952

Turnover £m

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Strong demand for our services

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A national advertising campaignreinforced our commitment to the middlemarket sector and our sponsorship ofThe Sunday Times Profit Track 100, TechTrack 100 and Fast Track 100 (now in its eighth year) confirmed our long-termcommitment to entrepreneurial companies.Independent market research supportsour experience around the country thatwe are now perceived to be the mosteffective accountancy firm in the middlemarket, a position which is consistentwith our leading market share.

Providing our industryexpertiseOur clients tell us that our extensiveindustry knowledge is one of our mostvaluable assets. This advantage isfacilitated by our size and we continuedto invest in our specialist industry teams,knowledge networks and research.

Consolidation and other pressures withinthe retail industry drove advisory andtransactions related revenues. Demandfrom the technology sector continued topick up. Within the information andcommunications sector, work resulting fromSarbanes-Oxley and IFRS was a significantcontributor to increased revenues.

In financial services all sectors performedwell. The banking and capital markets andinsurance sectors benefited from ourclients’ need for assistance with regulatorycompliance, including Basel II. The yearalso marked the 10th anniversary of ourLondon Insurance Club.

Helping to improvepublic servicesOur public sector clients at central,regional and local levels face pressure to achieve increased efficiency and meetdemands for greater consistencyof service delivery and more choice.We helped them to address suchchallenges across sectors as diverse ashealth, education, transport, home affairs,criminal justice, local government,housing, social welfare, defence andinternational development.

We worked with the Department of Work& Pensions on an employer-led initiative,‘Fair Cities’, designed to help peopledisadvantaged in the labour market bystrengthening the connection betweenlocal jobs and the skills and trainingsystem. We advised the PensionRegulator on the new clearanceprocedures for the pension implicationsof corporate transactions and wereviewed the salary structure of the UKjudiciary on behalf of the Senior SalariesReview Body.

We carried out extensive work on theDepartment for Education and Skills (DfES)Behaviour Improvement Programme. Anindependent review by the National AuditOffice (NAO) showed that pupilattendance at the schools in the 60 localauthority areas in this programmeimproved at around twice the rates ofreduction in the national averages.

Within the health sector, we helped morethan 20 hospitals considering thetransition to Foundation Trust status.

Tina Hallet, public sector tax leader,at our flagship Government Forumfor clients

Consumer,industrialproducts &services£828m

Government &public sector £168m

Financialservices£533m

Technology, infocomms,entertainment& media£251m

9%

30%47%

14%

2005 Turnover £1,780m

Consumer,industrialproducts &services£745m

Government &public sector £153m

Financialservices£460m

Technology, infocomms,entertainment& media£225m

10%

29%47%

14%


Industry analysis


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We are the largest private sector providerof assurance services to the publicsector. Working closely with the AuditCommission, Audit Scotland and theNAO, we support the public sector’sdrive for improved governance, financialmanagement, value for money andaccountability.

Assurance services rise tothe reporting challengeIFRS and Sarbanes-Oxley dominated thereporting and regulatory landscape formany of our larger clients. Our efforts to support clients in response to thesechallenges were a particular feature of a very successful year, with Assuranceservices’ turnover up 19%. Assignmentsincluded IFRS work for Aviva, Cable &Wireless and Sarbanes-Oxley complianceprojects for Microsoft UK.

The increase in our turnover wasaccompanied by some decline in marginson audit work. Increased regulatory costsand risk have not yet been fully reflectedin audit price increases.

Delivering service of the highest qualityenabled us to maintain our audit positionwithin the FTSE 100 with a market shareof 42% (2004: 42%) at the end of theyear. Our continued focus on fastgrowing medium sized companies hasalso been successful. We audit 33%(2004: 34%) of the top 100 largestprivately owned UK companies.

We have assisted many of our clientsin starting to deal with the challenges ofthe new Operating and Financial Review(OFR) Reporting Standard. As a

committed supporter of reportingtransparency, we believe that the OFRrepresents an opportunity to make a stepchange in this area.

Our clients are increasingly seekingsupport in helping them to identify,measure and mitigate a wide rangeof business risks and achieve assuranceon their processes. Our Risk AssuranceServices business has continued to growthe range and volume of services offered,acting for many FTSE 100 companiesduring the year in the areas of riskmanagement, internal audit andinternal controls.

Tax returns to growthOur strategy is to help our clients tocomply with tax law, manage their tax riskand add value to their businesses. Taxservices returned to growth of 8% due toa strong focus on our chosen markets, animproved economy, and a more settledregulatory environment. We also have alarge and thriving private client practiceand our work for the UK subsidiaries ofoverseas groups, particularly from theUSA, has now stabilised after losses ofrevenue as a consequence of changingoverseas regulations.

Our tax services not only comply with UK tax avoidance disclosure rules butalso with our global network Tax PracticeCode of Conduct. The latter sets out theprinciples that the PwC network appliesconsistently in providing tax servicesacross the world. We also input to manyconsultations with government with theaim of simplifying and improving UKtax law.

Clients


Client analysis

Other UK quoted &private companies£485m

Inboundcorporate£447m

FTSE 100£248m

FTSE 101-500£157m

Other, including individuals & not for profit organisations £275m

Government& public sector£168m


Other UK quoted &private companies£441m

Inboundcorporate£403m

FTSE 100£217m

FTSE 101-500£131m

Other, including individuals & not for profit organisations £238m

Government& public sector£153m

14%

9%27%

25%16%

9%

14%

8%28%

25%15%

10%


Market leadership

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The size of the PwC global network offirms gives us unparalleled access toover 22,500 tax professionals from over140 countries, helping our clients complywith local and international rules andadding value to their businesses. Weinvest in specialisms and in sharingknowledge for the benefit of our clients.Our strengths have been recognisedduring the year – our Tax Knowledge andInnovation team won Best Big Four TaxTeam at the 2005 LexisNexis Tax Awardsand we were awarded both UK andEuropean Transfer Pricing Firm of theYear by the International Tax Review.

Technology continues to help us assist ourclients manage their tax affairs. Examplesinclude automated VAT returns, our globalcorporate tax compliance system, onlinecollaborative workrooms and shareTax,a cross-border online service allowingcompanies to calculate their tax and socialsecurity withholding obligations for theiremployees’ incentive plans acrossnine countries and 11 US states.

Accelerated growth inPerformance ImprovementConsultingOur Performance Improvement Consultingpractice (PIC) won market share, achievingturnover growth of over 28% during theyear. The services provided by PIC andother areas of the firm that are definedas consultancy by the ManagementConsultancies Association led to us beingranked as the UK’s 11th largestconsultancy practice. We expandedrapidly in both the private and publicsectors; providing support to private andlisted companies to reduce costs, improve

efficiency and implement effectivechange, as well as assisting governmentagencies with their modernisation andefficiency agendas.

In addition to investing in key specialisttalent, we continued our successfulstrategy of building our consultingcapability across key industries focusedon finance, people, operations and areasof technology, strategy and policy.

We place heavy emphasis on sustainablebusiness improvements, workingcollaboratively with our clients to turn ourbusiness and technical insights intopractical, measurable solutions for them.

Integrating our consulting, tax, corporatefinance and transaction skills we have putparticular focus on helping businesseswith their outsourcing activities, fromstructuring the outsourcing transaction,through implementation of the servicelevel monitoring programme to the smoothtransition to the third party provider.

Business RecoveryServices maintains its leadWe are the UK’s largest provider of businessrecovery and insolvency services withover 850 specialist partners and staff.It is a counter-cyclical business, yetdespite the benign economic conditions,continued investment in our practicehas enabled it to sustain strong activitylevels with turnover only declining by6% during the year. We have furtherstrengthened all aspects of our businessand continue to diversify our servicerange whilst retaining our core focuson providing solutions to troubledfinancial situations.

Steve Hasson, collects prizes for UKand European Transfer Pricing firmof the Year at the International TaxReview European Awards dinner

Our middle market nationaladvertising campaign


14 www.pwc.com/uk

The administration of MG Rover Groupwas our largest assignment of the year,drawing on the firm’s expertise in theautomotive sector, other specialistexpertise and our strong regional andinternational networks. Other majorassignments included Shotton CombinedHeat & Power Limited, Exeter FundManagers Limited, Benson Group andParkside Group.

Rising activity inTransaction Services The mergers and acquisition marketstarted slowly but picked up during theyear. This was driven in particularby secondary activity amongst PrivateEquity Houses and a very strong debtmarket. Against this backdrop, TransactionServices performed well in both theCorporate and Private Equity Marketswith overall turnover growth of 9%.

In the corporate sector we workedon Barclays’ acquisition of South AfricanBank, ABSA, and Aviva’s acquisitionof RAC. The year was equally successfulon the private equity side and includedthe acquisition of Amadeus Global TravelDistribution by BC Partners and Cinven,one of the largest European privateequity deals this year, Charterhouse’spurchase of SAGA and the sale to TerraFirma of Odeon Cinemas and UCIby WestLB and Vivendi/Viacomrespectively. We also advised on thesale of LEGOLAND Parks to BlackstoneGroup. In the healthcare sector weadvised on the purchase of NHP Plc,Westminster, Covenant Healthcare,Southern Cross and BetterCare.

An award-winning yearfor Corporate Finance Corporate Finance grew 14%, winningmarket share in a relatively flat market.High profile transactions includedadvising the shareholders of ParadisePoker on its sale to Sportingbet Plc foran initial consideration of US$297.5m(£161.9m), and advising the managementteam of Maplin Electronics on its £244msecondary buy-out, AcquisitionsMonthly’s Mid-market Deal of the Year.Acquisitions Monthly also awarded usMid-market Adviser of the Year.

We advised on the complexities involvedin transactions at the public/privateinterface, acting for example, as financialadviser to the private sector in the LeedsHospital scheme – the EMEA PPP Dealof the Year. We broadened our PublicPrivate Partnership advice into housingand regeneration and extended our publicsector strategy and policy services.A series of major transactions worldwidesaw us awarded PFI Global Adviserof the Year by Thomson Financial.

Our Valuation & Strategy businessshowed solid growth as clients madeincreasing demands for valuation,regulatory, competition-related economicsand strategy advice. We advised on allthese aspects for Romtelecom, Romania’slargest telecommunications operator. Weexpanded our activity in the Entertainmentand Media, Telecommunications,Aerospace and public sectors. In addition,the impact of IFRS on transactionscontinued to generate demand for our valuation services.

We launched the UK DealConfidence Survey to track theviews of FTSE 350 and large privatecompanies on their deal strategy,the growing influence of privateequity and the outlook for M&A

Clients

Our IFRS illustrative financialstatements publication


Providing clients withdeep expertise

www.pwc.com/uk 15

Addressing HR challengesIt has been an encouraging year for HumanResource Services with 8% growth. Thiswas fuelled by the increasingly complexregulatory environment together withmarket recognition of the need to buildsustained human capital value. Thecorporate transactions market alsocreated increased demand for HR relatedservices and HR transactions support.Pensions changes affecting both benefitdesign and future management of costsdrove significant growth in the pensionsadvisory market.

We were actively involved in the debatesurrounding HR risk issues and howbusinesses derive the greatest value fromtheir people. Companies increasinglyexpect to be able to value their HReffectiveness and we provide a portfolioof services to help them, including HRbenchmarking data from one ofthe world’s largest databases of HRmetrics, Saratoga, which is part of thePwC network.

Wider scope for Actuarial ServicesAlthough turnover from specific actuarialassignments was flat, there wasincreased demand for actuarial input to broader Assurance, Tax, Transactions,Business Recovery and CorporateFinance assignments. We are one of the UK’s largest providers of actuarialservices to the insurance sector and the fourth largest actuarial consultancy in the country. We continue to advise on a variety of schemes of arrangement,support the liquidators of Independent

Insurance and provide actuarial advice to major deals. Actuarial consultancy to employers and trustees of pensionschemes was particularly active in thelight of proposed new tax rules and theapproach taken by the new regulator to provide greater security to pensions.

Significant new work resulted from therecently introduced FSA regulatorycapital regime.

Changing market forForensic ServicesWe focused increasingly on our proactiveservices such as Licensing Management,Capital Project reviews and pre-deal saleand purchase reviews. However, theabsence of major corporate investigationsand a reduction in high court litigation ledto a 6% reduction in turnover.

With over 90% of all business recordsnow electronic, our proprietary technologytools and forensic laboratories around theworld are increasingly winning assignmentswhere enormous amounts of bothelectronic and hard copy information needto be analysed and processed robustly.

The past year saw a growing recognitionof financial crime as a boardroom issue,boosted by changes in the regulatoryenvironment and the increasing burdenof responsibility on company directors.We helped to resolve an increasingnumber of disputes arising from largescale IT projects and saw notable growthin our work with the public sector,particularly demand for fraud riskmanagement services.

“I found the OFR Preparers’ Guidevery helpful. It is written in plainEnglish, practical and pragmatic.”Philip Broadley, Financial Director,Prudential plc

PwC sponsors the CIPFA PublicReporting and AccountabilityAwards to recognise and promotebest practice in the public sector


Great*

Craig Atkinson,Martin McEwen,Catriona Lynch andJoanne O’Donnellin the breakout areaat our newlyrefurbishedEdinburgh office

Making PwC a great place to work

People

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18 www.pwc.com/uk

recruiting 1,400 experienced joiners andover 1,000 students into a wide variety of roles over the year.

Strong investment in technology and the development of our website haveestablished us as a pioneer in onlinerecruitment. Visitors to our careerswebsite peaked at 123,000 in November2004, with a total of over one millionvisitors coming to the site during the year.

Our schools recruitment team ran 300events, recruiting 160 school leavers intoour various programmes. More than 50%of university students were aware of PwCby the time they left school, demonstratingour brand awareness stands comparisonwith household consumer brands.

For the second year running, we werevoted the UK’s number one graduateemployer in The Times Top 100 GraduateEmployers/High Fliers annual survey. PwCwas also voted, for the first time, theIdeal No.1 Employer by business studentsin the annual Universum student survey.

This year 21% of our graduate recruitswere from ethnic minority backgroundswhereas only 13% of graduates werefrom such minority backgrounds. Thelevel of female graduate recruitment ishowever of concern. At 38% it reflectsthe proportionate level of femaleapplications that we receive, but is wellbelow our experience of the last twodecades, which was close to an equalintake of male and female graduates. We understand that our experience issimilar to many financial institutions andthe other major accounting firms. We areinvestigating the reasons for this as we

Over this last year we have focused onincreasing our engagement with ourpeople and this effort has paid dividends.

We have had unparalleled success inrecruiting the best people from a widerange of sources. We achieved thehighest acceptance rate of graduate joboffers of any of the Big Four firms in theUK. We continue to lead at UKuniversities as the employer of choice,a position we have strengthened stillfurther by winning a number of industryawards for innovation and the promotionof diversity in recruitment.

We strive to improve our workingenvironment and the opportunities open to our people, and to provide thetools to manage their own developmentand progress. These efforts have bornefurther fruit this year.

Our quarterly staff survey, YouMatter,continues to gain momentum, both interms of the numbers of people takingthe time to give us their feedback and the way the information generated is usedactively as a basis for improvements.

This year 95% of respondents told usagain that they are proud to work atPricewaterhouseCoopers, and ourannualised voluntary leaving rateat 12%, was our lowest on record.

Attracting and recruitingthe very bestOur recruiting efforts are fundamental to the firm’s continued success. Eachworking day, we receive over 200applications. We select the best of these,

95per cent of ourpeople are proudto work here

Our strong recruitment brand onuniversity campuses and award-winning One. For All. campaignmeant that many of the beststudents applied to us earlier in the year, giving us a head start over our competitors in the race for graduate talent

Source: ISR survey and YouMatter

PwC UK

Average for professional services firms (1)

Average for UK companies (2)

I am proud to be associated with PwC

95%

83%

75%

(1) Contains the opinions of more than 68,000 employees across the globe.(2) Contains the opinions of more than 129,465 employees from multiple industries across the UK.

People

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PwC moved up from Bronze to Silver status in this year’s Racefor Opportunity benchmarking,achieving a score of 77%, wellabove the professional servicessector’s average of 53%. In theTarget National GraduateRecruitment Awards, we wonthe Association of GraduateCareers Advisory Services Awardfor the most outstandingcontribution to diversity ingraduate recruitment, following a poll of university careersadvisers across the UK.

Encouraging people to achievetheir full potential

www.pwc.com/uk 19

are keen to see a return to a more evenflow of male and female graduateapplications in the future. We believe that we offer interesting and variedopportunities for both women and menand the work/life flexibility we provideis designed to appeal to all.

We were privileged to be involved from theoutset of a graduate placement schemeFast Track with Scope, the country’sleading disability charity. The schemeprovides work experience for graduateswith disabilities as a precursor to potentialfull-time employment.

We have already recruited two high calibregraduates through this scheme and arenow working towards increasing thatnumber. This is an exciting scheme,enabling us to learn more about thedifficulties faced by talented disabledgraduates and how we can take positiveactions to support them in their careers.

Applications from experienced peoplereached a new high of 44,100, including a wide range of qualified client-facingpersonnel, as well as specialistprofessionals to support our firm’soperational infrastructure.

Our award winning Employee ReferralScheme had its most successful year todate, with some 13% of all our new recruitsbeing introduced to us by PwC people.

Learning and developmentOur aim is to provide an environment thatencourages people to achieve their fullpotential. We believe that, given the righttools and the freedom to explore all theoptions available, people will take an

entrepreneurial approach to develop newskills and challenge themselves to findnew opportunities. This year, we investedover £39m direct cash costs in learningand development activities.

We make formal learning opportunitiesavailable through every possible channel,including e-learning tools and virtualclassroom learning that allows accessto learning whenever and wherever ourpeople want it. E-learning, whichaccounts for a growing proportion of ouroverall training, is offered via our intranetin subjects ranging from diversity andequality to technical and managementskills. More traditional methods such as classroom training, workshops, one-to-one coaching and mentoring all continue to play a vital role.

We continue to champion the GlobalMobility programme, which managesinternational assignments throughout ourglobal network. At the end of the financialyear there were 543 international assigneesfrom 70 countries working with us in theUK and 360 UK partners and staff oninternational assignments in 36 otherterritories. During the year, we alsolaunched a new international job postingswebsite in order to publicise assignmentopportunities within our global network.At the end of the year, there were some1,100 international opportunities within thePwC network advertised on the website.

Opportunities to develop are also createdthrough a number of PwC initiatives suchas Ulysses, the PwC network’s leadershipdevelopment programme for futureleaders, Genesis Park, the PwCnetwork’s innovation centre, based inWashington DC and Voluntary Services

A key part of developing ourpeople is making it easy for themto find out about the wide rangeof internal career opportunities.Our internal job postings website,InsideTrack, received 3,000 visitseach month during the year, and1,100 of our people applied forcareer moves within the firm.


Our continuing associations withworld-class external providers,including London BusinessSchool, Ashridge Business Schooland Cranfield University, help usto deliver the highest qualitytraining solutions for our people.

20 www.pwc.com/uk

A key element of our developmentprogrammes is to equip partners anddirectors to handle the leadershipchallenges that come from changes intheir roles. These role changes are alsosupported through an active coachingand mentoring programme and a focuson providing feedback on performance sothat partners and directors feel stretchedand able to maximise their potential.

With the continuing growth and expandingopportunities for our business we havenearly doubled the number of new partnersadmitted this year. The majority of thesenew partners are from within and we arecontinuing to actively promote the valueof partnership to directors and managersthrough our Aspire programme. We arealso actively recruiting proven direct entryexpert partners.

AlumniPwC’s UK alumni programme has a longhistory and we continue to build a strongalumni network. Former employees of thefirm, and our legacy firms, are eligible tojoin and, to date, over 20,000 UK alumniparticipate in the programme.

Members benefit from access to a widealumni network, our bi-annual newsletter,information on our wide range of servicesand expertise, direct contact with thefirm’s experts and advisers, and invitationsto our alumni and firmwide events.

Recognising andrewarding achievementsWe remain committed to providing acompetitive reward package. We believe

Overseas placements through ourbusiness partnership scheme.

This year we launched a new initiativetargeted at enhancing the careers anddevelopment of those engaged insecretarial and administrative work. This includes the appointment of a seniorleader for the community, supported by a small team who will focus on meetingthe development needs and aspirationsof our secretaries and PAs.

During the year we encouragedmanagers to do more in terms of formalperformance appraisal in their teams. We held workshops in advance of thisyear’s appraisals to coach managers in what is expected of them and theimportance of the process.

PwC has received numerous awards over the last year with recentachievements including being a finalist in the National Business Awards Investorsin People Award for Excellence in People Development.

Partner and directordevelopmentOur partner leadership programme hascontinued to be in great demand. Duringthe year this programme won an awardas the Best HR Initiative at the EuropeanPractice Management Awards. Followingthe growing success of the programmewe have extended it to cover all directorsin the firm. Already courses such asPartner Survival, Running the rest of yourlife and Consulting with the Board havebeen extended to our directors.

People

Over 20,000 alumni receive ourKeeping in touch newsletter


Making us more innovative and vibrant

www.pwc.com/uk 21

that reward should reflect the market rate for the role, as well as performanceof individuals and that of the business. We aim to improve the range of benefitson offer in our flexible benefits package,Choices, to help each person find aselection which best suits their uniquepersonal circumstances.

Innovations during the year include a new Recognition Toolkit, designed tosupport business leaders in recognisingand celebrating success in their teams.As a firm, PwC is also keen to recognisethe achievements of its people outsidethe work environment, through theirwillingness to devote their own time and energy to help their communities.

Diversity The diversity of our colleagues makes for a richer, more innovative businessculture. This in turn gives us theopportunity to create more imaginativesolutions for our clients, and buildcompetitive advantage in themarketplace. We also see diversity asbeing at the very heart of effective talentmanagement. This means we need toattract and retain the best talent from the widest possible pool, so that we candevelop a better understanding of, andgreater responsiveness to, ourincreasingly diverse clients and markets.

We have improved awareness andunderstanding of diversity. Through e-learning, everyone in PwC undertooka course to help them reach a betterunderstanding of diversity, the issues itraises and their responsibilities in creatingan inclusive environment.

Our networks are an integral part of thefabric of the firm; PwCWomen, EthnicForum, religious networks and GALEmeet regularly. We were the firstprofessional services firm to become aStonewall Diversity Champion, and weachieved 17th position in its Top 100Employer Index.

On age diversity, we sponsored the Ageat Work study by the Employers’ Forumon Age. This report, which analyses theexperiences and aspirations of the UK’sworkforce by age group, is helpingemployers and policymakers to motivate,support and develop people of all ages.

We have also worked with CranfieldUniversity’s Centre for the Developmentof Women Business Leaders, followingthe launch of its Female FTSE Index in2004, on a programme to increase thenumber of female executive and non-executive directors in FTSE 100businesses. The programme – WomenDirectors on Boards – includes awomen’s mentoring programme involvingthe Chairs and CEOs of over 20 FTSE100 organisations, and a cross-corporatenetwork of the women involved.

Source: YouMatter

05

I believe that PwC is committedto becoming a great place to work

04

03

87%

79%

65%

Moira Elms, Head of HumanCapital, presenting at a recentPwCWomen event


Responsible*Recognising our wider responsibilities

Volunteers from across the firmworking together for the widercommunity in New Lanark, Scotland

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24 www.pwc.com/uk

Corporate responsibility and sustainabilityare not separate departments withinPwC, but an integral part of our business.We are committed to having a positiveimpact on the people and world aroundus and to work with integrity andresponsibility in everything we do.

Corporate responsibilityperformanceWe group our corporate responsibilityactivities into the four main areas ofworkplace, marketplace, environmentand community.

We actively monitor and measure ourcorporate responsibility performance andwe take part in the annual Business in theCommunity (BitC) Corporate ResponsibilitySurvey. We were proud to be rankedequal 5th this year, and to be the onlyprofessional services firm in the top 50.

We were also highly commended for ourimpact on society at the BitC Awards forExcellence 2005.

Creating a betterworkplaceIn the People section of this report wecomment on our strategy to make PwC a great place to work for all our people.We have highlighted a range of mattersdesigned to create a better environmentfor our people, including our YouMattersurveys, training and development,inclusiveness and diversity and disabilityaccess. We are always ready to help ourpeople. In addition to career counselling,

5coaching and mentoring, we have anestablished code of conduct andconfidential grievance and ethicalguidance procedures, including ourwhistle-blowing helpline.

Encouraging responsibilityin the marketplaceOur values and behaviour in themarketplace are based on succeedingthrough integrity. We regularly review ourperformance through a number ofsurveys, including our client satisfactionprogramme. Brand recognition surveysunderline our reputation for ethicalbehaviour. We have strong systems inplace to ensure that we comply with theregulations that govern our business. Inthe Client section of this report wecomment on our involvement in publicpolicy, including leadership through theBuilding Public Trust awards and therange of services provided to the publicand education sectors, includingperformance improvement advice andthought leadership.

With our suppliers, we have embeddedcorporate responsibility practices into ourprocurement processes, includingspecifically reviewing potential suppliers’corporate responsibility performance. Wealso work closely with our suppliers toimprove levels of corporate responsibilitythroughout our supply chain. Over 80%of our major suppliers currently havevisible corporate responsibility policiesand we are encouraging all our majorsuppliers to follow suit.

Energy consumption

CO2 production

Waste to landfill

CO2 production saved through use of Telesuite 294 tonnes

Reduction in waste to landfill 640 tonnes

Glass bottles saved through onsite bottling 115,000

Reduction in our resourceconsumption per head

Paper usage

Total reductions

5%

8%

18%

72%

25%

Ranked fifth in theBitC CorporateResponsibility Index

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Commended for ourimpact on society

www.pwc.com/uk 25

Safeguarding the futureenvironmentWe are committed to minimising ourdirect impact on the environment. We report our performance against acomprehensive set of targets on ourwebsite. In addition to our performancein the BitC Corporate ResponsibilityIndex, we also scored highly in theEnvironment Index. We scored over 93%and were ranked 26th overall, 3rd in ourdesignated sector of Support Services.

Our Green Fleet initiative, involvingcarbon neutral cars, hybrid fuelled cars,and advice on reducing emissions, wascited as a major factor in our winning theMost effective company car strategyat the Employee Benefits awards 2005.

When we won this award the judges wereparticularly impressed by our CarbonNeutral Environmental Initiative, underwhich our people can elect to pay fortrees to be planted in order to make theircompany vehicle carbon neutral. To date3,500 trees have been planted throughthe scheme on the Isle of Bute inScotland.

We also have an industry-leadingagreement with our preferred hire carsupplier, Hertz, for all of our bookings tobe carbon neutral. And we encourage ourpeople to cycle to work, includingproviding showers and secure bicyclestorage facilities in many locations.Video- and tele-conferencing are beingpromoted as an alternative to businesstravel, and we have installed newfacilities in ten UK locations.

We have continued last year’s reductionin waste-to-landfill, through a continuedfocus on our comprehensive recyclingprogramme. We have also cut our glasswaste by re-using bottles in our on-sitebottling facility. Our growing use ofnetworked devices, instead of multiplelocal printers, enables greater use ofdouble-sided printing and copying, so helping the environment by bothreducing our paper usage and also our energy consumption.

Energy to power our offices is our largestproducer of greenhouse gas emissions,with electricity alone accounting for moreCO2 production than our total travelmileage. This year we have put in placearrangements to source green (zero CO2)electricity for all offices where we controlthe supply. This will significantly reduceour future CO2 production. We are alsoachieving savings in energy consumptionthrough improved monitoring andmanagement. For new offices we ensurethat our buildings are designed withenergy efficiency in mind.

Corporate responsibility in our communities Our Community Affairs programmeencompasses a broad range of corporatestrategic partnerships, local initiativeswhich provide opportunities for staffinvolvement and skills development.

We aim to match our skills and resourcesto the needs of our community partners.This enables us to share newperspectives while simultaneouslyoffering our people opportunities to

Business in the Community hasjudged us as outstandingperformers in four key areas:

Corporate Strategy – whichassesses how closely responsiblevalues and principles drive ourbusiness strategy

Integration – which assesseshow well these values areincorporated into our operations

Marketplace Management –which assesses how responsiblywe manage and sell our servicesand treat our suppliers

Workplace Management –which assesses how well we liveup to our strategy of being agreat place to work.


26 www.pwc.com/uk

““Working as a PwC volunteer on anactive citizenship project for youngpeople gave me real insight intohow schools operate and the issuesaffecting them. I’m now moreconfident when I talk to clients.”Nicola Burnard, PwC volunteer

PwC and British Airways volunteersadvise students from the HayesManor School, Uxbridge, as part ofthe numeracy-based learningproject Euro Traveller Challenge

Schoolchildren and our people takingpart in the Fit 4 Fun 2005 eventcoordinated by Birmingham Cares

extend their skills. It also helps ourpeople to make more enlightenedbusiness decisions based on the additionalinsight they gain from first-handinvolvement with the wider community.

We have continued to focus our effortsand resources on benefiting disadvantagedcommunities and young people. Wesupport activities to help raise levels ofeducational achievement and developemployability and citizenship skills.

Increasing involvementwith our local communitiesOver the course of a number of yearswe have developed a strong workingknowledge of our local communities.This knowledge, combined with extensivelocal networking, has enabled us tobecome recognised as being part of, andintegrated with, the local communitiesaround our offices throughout the UK.

We have continued to nurture and growour relationships with our national andlocal community partners. Two of our key developments this year are described below.

We have a three-year agreement withVolunteer Reading Help (VRH) to helpencourage and support children who findreading a challenge. As well as providingcore financial and in-kind support,we have now met our first-year targetof having 100 people trained by VRH.They are now actively helping primaryschoolchildren in schools close to ouroffices in Birmingham, London (Southwark,Westminster and Islington), Manchester,Southampton and Gatwick. We are

on schedule to meet our target of training300 volunteers by March 2007.

We have developed an innovativenumeracy-based learning project inpartnership with British Airways and theHillingdon Education BusinessPartnership. Key Stage 3 children fromtwo schools local to our Uxbridge officewere given a business challenge to solve.Volunteers from both organisationsenabled 350 pupils to benefit from theprogramme to enhance their key skills.The programme formed part of the DfESLondon Challenge. It has also receiveda Hillingdon Business Forum CorporateResponsibility award. In view of itssuccess, we are planning to develop thisprogramme further with schools local toour East Midlands and Gatwick offices.

The internal awareness of our activitieshas increased with presentations acrossthe UK to highlight how the firm, ourcolleagues and communities benefit fromour programmes.

Our contribution to the community hasbeen recognised this year not onlythrough our BitC CorporateResponsibility Index rating, but alsothrough the re-accreditation of oureducation programme in London underthe BitC Awards for Excellence.

Our communitycontributionsWe continue to meet the BitC PerCentStandard, a community investmentbenchmark, which means we arecommitted to giving at least 1% of ourrelevant profits to the community.

Firm


Contributing to our local communities

www.pwc.com/uk 27

We have met this commitment each yearthroughout the past decade. In managingand measuring our community involvement,we benchmark ourselves against otherpartnerships and organisations.

Overall, we have contributed £4m (2004: £3m) to the wider community byway of cash donations, time and gifts inkind. This includes donations of over£365,000 made by the firm to the RedCross and UNICEF towards the Tsunamirelief effort as part of a staff matchedfunding programme.

This year 2,034 of our people (2004: 1,030)took part in community volunteeringactivities including one-to-one studentmentoring, leading classroom sessionswith businessdynamics, the businesseducation and enterprise charity, and inteam community activities. This equatedto a contribution of some 21,000 workinghours (2004: 11,500) to the community.Looking forward, we are aiming to increasethe percentage of people who volunteerfrom 14% this year to at least 20%by the end of June 2008.

Many of our people donate their own timeand money to charities and communityorganisations which do not necessarily fallwithin the firm’s focus areas. In recognitionof this, we have two schemes throughwhich donations are made to the charitiesthey support. These are the MatchedGiving Programme for fund raisers andthe Volunteering Awards Scheme forpeople who give their time to their chosencauses. During the year 700 people(2004: 500) received funding for theirvoluntary organisations. We also continueto offer the payroll giving scheme, Give

As You Earn, and to cover the associatedadministration costs levied on individualaccounts. Around 3% (2004: 3%) of ourstaff contributed through this scheme.

The way forward oncorporate responsibilityWe are proud of our achievements acrossthe broad spectrum that comprisescorporate responsibility.

Through our strategic review, and ourwide range of stakeholder engagementactivities, we know there are severalareas in which we need to improve, andothers where we have yet to developadequate performance measures. We are also very conscious of the changingexpectations that society places on largeorganisations and we will continue topursue our corporate responsibilityagenda vigorously.

Relationships with our nationaland local community partnersinclude:

Volunteer Reading Help (VRH)

The Common Purpose ‘Your Turn’leadership programme for youngpeople

The Community FoundationNetwork, including our supportfor the 2005 national conferencein Edinburgh

BitC and its business-ledemployee volunteering initiative,Cares, of which we are afounding member

The National Education BusinessPartnership Network (NEBPN) anda number of local EBPs includingHillingdon with whom we workedon a joint school project withBritish Airways

Parlez-vous Français? a Frenchlanguage project with two of our partner primary and secondary schools, which formedpart of the Entente Cordialecentenary celebrations.

Siobhan Bird, PwC volunteer readerwith a pupil at a local school


28 www.pwc.com/uk

Management BoardDevelopment and implementation of policies, strategy, direction andmanagement of the firm are theresponsibilities of the Management Board,which is chaired by Kieran Poynter. He was re-elected by the partners for a second term of office for three yearsfrom July 2005. The Chairman appointsthe other Management Board members,all of whom are partners in the firm.Operational management is effectedthrough these Board members. EachBoard member has responsibility andaccountability for a defined aspect of our business.

The firm’s client-facing activities aremanaged through a matrix structure with three primary elements, Lines ofService, Geography and Industries. Lineof Service leaders are responsible forresource and profit accountability andRegional Chairmen and Industry Leadersco-ordinate our market activities.

The Management Board typically meetstwice a month and on an ad-hoc basis as necessary. The Board receives monthlymanagement accounts and all the otherinformation and support which it needsto carry out its duties.

Supervisory BoardThe Supervisory Board, which isindependent of the Management Board,consists of 15 partners elected fromacross the firm for a term of three years,together with the Chairman as an ex officio member.

The members of the Supervisory Board,all of whom served throughout the yearunder review, are:

John Whiting*, ChairmanGordon Ireland, Deputy Chairman Mohammed Amin†

John Brendon†

Ann Cottis Roy Hodson†

Pam Jackson*Gerry LagerbergDavid McKeith*Ron McMillanKen Murray Jack Naylor Pat Newberry†

David Phillips*Tim Pope†*Kieran Poynter (ex officio)

* Senior Management RemunerationCommittee member

† Audit, Risk and IndependenceCommittee member

Firm

The present Supervisory Board waselected to office on 1 July 2003 and ischaired by John Whiting. It has a generalresponsibility to give guidance to the firm’sChairman on matters which it judges to be of actual or potential concern topartners, taking into account the interestsand well-being of the partners and thefirm as a whole. It takes independentprofessional advice where appropriate.The Supervisory Board also has specificresponsibilities under the Members’Agreement, the firm’s written constitution,including approving the Annual Reportand Accounts, the admission of newpartners, determining and overseeing the process for electing the Chairman and checking that partner remunerationpolicies are appropriately applied.

Senior ManagementRemuneration CommitteeThe Senior Management RemunerationCommittee is a committee of theSupervisory Board which determines the profit share of the Chairman andapproves his recommendations for theprofit shares of the other members of the Management Board.

Audit, Risk andIndependence CommitteeThe Audit, Risk and IndependenceCommittee is a committee of theSupervisory Board consisting of fivemembers. It has responsibility forreviewing the policies and processes for identifying and assessing businessrisks within the firm and the managementof those risks, including financial control,

compliance and independence. It alsoreviews the firm’s financial statementsand considers the scope, results andeffectiveness of internal and externalaudit, including reviewing theindependence of the external auditorsand their range of non-audit services and fees. It met seven times in the yearended 30 June 2005. The Head ofOperations and Finance, together withthe internal and external auditors, attendits meetings by invitation.


Strong managementand governance

www.pwc.com/uk 29

The members of the Management Board, all of whom served throughout the year: (from left to right) Keith Tilson, Line of ServiceLeader – Advisory; Moira Elms, Head of Human Capital; John Berriman, Head of Operations and Finance; Kieran Poynter,Chairman; Owain Franks, Strategic Thinking; Richard Collier-Keywood, Line of Service Leader – Tax; Rodger Hughes, ManagingPartner – Clients & Markets; Glyn Barker, Line of Service Leader – Assurance; Owen Jonathan, General Counsel.


30 www.pwc.com/uk

Managing risk and qualityOur culture and approach areunderpinned by our Code of Conductwhich sets standards of professionalismand integrity for all partners and staff. We are committed to maintaining bestpractice systems for risk managementand internal control.

The Management Board takes overallresponsibility for establishing systems of internal control and for reviewing andevaluating their effectiveness. The day-to-day responsibility for the implementationand effectiveness of these systems andfor ongoing monitoring of risk rests withsenior management.

The five key elements of our riskmanagement systems are:

• Each year the Management Board setsand communicates its strategic prioritieswhich cascade into a business planningprocess. The contribution of each partof the firm is defined and monitoredthrough balanced scorecard reporting;

• The Management Board has appointeda Risk Council, a committee of theManagement Board charged withoverseeing the controls that have beenput in place to identify, evaluate andmanage risk;

• The management of each Line of Serviceand of our Shared Services and NationalFunctions maintains risk registers thatdocument risks and responses to them.They each carry out a risk assessmentand report annually to the Risk Councilon the effectiveness of their riskmanagement during the year;

• The UK firm’s internal audit team andrisk management functions provide an objective view of the effectivenessrespectively of financial and operationalsystems and controls throughout thefirm and of our professional servicesrisk management systems, reporting to both the Management Board and to the Audit, Risk and IndependenceCommittee; and

• The Audit, Risk and IndependenceCommittee considers external andinternal audit plans and the results of those audits.

Our risk management systems aredesigned to manage, rather than eliminate,the risk of failure to achieve businessobjectives. This means they providereasonable, but not absolute, assuranceover the prevention of materialmisstatement or loss and quality failings. These systems have been in place throughout the financial year and up to the date of approval of thesefinancial statements.

The firm has specific procedures toassess the risks associated with newclients, including whether they meetexpected standards of integrity. As partof the annual audit cycle, we undertakeannual risk reviews of all audit clients,which include confirming that theycontinue to meet these standards.

We decline to act for clients where our assessment indicates that thesestandards are not met. Our policy is thatappropriate engagement terms must bein place for all client engagements.

Our Code of Conduct, on the waywe do business, sets standards ofprofessionalism and integrity

www.pwc.com/ethics

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Quality and integrity

www.pwc.com/uk 31

Maintaining quality We are proud of our reputation fordelivering quality service and recognisethe need to protect this reputation. Keyelements of our approach include:

Recruitment and development – Ourmaintenance of quality begins with ourrecruitment procedures, under whichcandidates are tested to ensure that theyare capable of performing to the highstandards we demand. Throughout theirtime with the firm, partners and staffparticipate in structured trainingprogrammes to ensure that their skillsand knowledge represent best practice.The qualifications and continuingprofessional education of practitionersare monitored to ensure that workcontinues to be carried out by individualswho are appropriately experienced and,where necessary, that they continue to be qualified under relevant UK legislative,regulatory and other applicablerequirements.

Quality procedures – For many of ourservices we have developed standardmethodologies and work programmes,which are designed to ensure that ourpartners and staff deliver work thatachieves the expected level of quality.Quality is further underpinned by teamsof appropriately trained people withindustry expertise, supported wherenecessary by specialist skills drawn fromother service areas from across the firm.Work done by each team member issubject to supervision and review by a more senior and experienced memberof the team. Audit files are maintainedelectronically on systems that support aninternationally applied methodology using

frameworks of audit steps and guidancedesigned to aid compliance withapplicable standards.

Consultation – Our consultative andsupportive culture means that no partneror member of staff is left to take a difficultdecision alone; he or she has access to wide informal and formal networks and technical panels that will help reachthe right solution to difficult problems.

Quality assurance programme – Each Line of Service runs an annualquality assurance programme in which an independent team of practice partnersand staff reviews completed engagementsto assess compliance with our qualitystandards and regulatory requirements.This process is also used to identifyareas where practice partners and staffrequire further training or support. Thereis a range of sanctions to address thefew cases where performance is assessedas falling short of requisite standards.

Learning lessons – Whilst our reputationfor quality is high, we do, on occasion,fall short of the standards expected of us.When this happens we seek to discussand resolve the issue with the clientconcerned. We also assess the caseindependently, examining the matter for lessons learned. We disseminate such lessons, together with anyrecommendations arising from reviews by our external regulators, to the relevantservice area.

Investing in our people – Recruitmentand retention of the best and brightestpeople is an essential part of our riskmanagement approach. We monitor the


32 www.pwc.com/uk

motivation of our people through regularsurveys and through feedback from ouryear-round counselling and appraisalprocesses. Informal guidance on careerdevelopment is available through ourmentoring programmes. All Lines ofService are required to make regularreports of their progress against peopleretention targets and these are monitoredby the Management Board.

Complying with regulation Our public interest responsibilities,particularly in regulated areas of ourbusiness such as auditing, demand thatwe deliver consistently reliable high-quality work that meets the expectationsof the independent authorities thatregulate, supervise and set ourprofessional standards. Our regulatorycompliance safeguards include:

Ethics, Independence and Compliance– We have a partner responsible forindependence and ethics who takesoverall responsibility for our compliancefunction. This function sets out policiesthat comply with relevant regulations,provides training, guidance and tools to our practice partners and staff to help them to follow those policies and oversees a practice assuranceprogramme to monitor compliance levels.Our policies on conflicts of interest andthe maintenance and monitoring of ourstandards of independence are particularareas of focus.

Personal independence confirmations –Confirmations of regulatory compliance,including independence, are requiredfrom all partners and staff at the date of joining and at least annually thereafter.

All partners and client-facing directorsand managers are required to recorddetails of their investment portfolios on a database that identifies potentialexceptions against a worldwide list ofrestricted investments. Partners and staffare required to confirm theirindependence in respect of audit clientsto whom they provide services. Minorinfringements of these rules can result in financial or other penalties for thoseconcerned. Serious breaches of our rulescan result in the partner or staff memberconcerned leaving the firm.

Scope of services – The lead auditengagement partner for each audit clientis required to consider and pre-approve,in conjunction with the client’s auditcommittees where appropriate, any non-audit services in order to ensure thatour independence and objectivity is notcompromised. An online system,Authorisation for Services, has beenimplemented across the PwC networkto inform audit partners of any proposedservices and enable them to considerand document pre-approval.

Audit team rotation – On listed clients,the firm requires rotation of the auditengagement partner and the qualityreview partner after five years and forother key members of the audit team afterseven years. On other audit clients thefirm requires rotation of the engagementpartner and key members of the teamafter ten years.

Whistle-blowing helpline – Ourcompliance function provides aconfidential helpline where any partner or staff member can raise queries andreport concerns.

Firm


Ensuring regulatory compliance

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Regulatory developments – We continueto monitor the risk that developments in regulation might necessitate a change in our business model. We participateactively in the development of theregulatory agenda to ensure that theobjectives of all stakeholders areconsidered. We believe that our businessmodel best enables us to meet the highquality standards of the capital markets,our clients and regulators.

Regulatory awareness – Trainingprogrammes are designed and deliveredto alert our people to regulatory changeand to reinforce awareness of keycompliance requirements. This yeartraining included anti-money laundering,and both personal and scope of serviceindependence requirements.

Ensuring operational efficiency –Delivery of client service is only possible if our infrastructure provides continuoussupport to our partners and staff. OurShared Services teams ensure that ourinfrastructure is maintained effectively. We have procedures in place to ensure

we comply with our legal duties under theHealth and Safety at Work Act 1974. Wehave comprehensive business continuityplans that are tested regularly so that wecan continue to operate effectively in theevent of a major disruption.

Our Code of Conduct embodies ourcore values of Excellence, Teamworkand Leadership. These are the valueswe look for and reward in our people.


Growth*Delivering sustainable growth

Sarah Yassien and Andrew Copeat our Embankment Place officein London

Financial

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36 www.pwc.com/uk

Members’ reportThe Management Board submits its reportand the audited consolidated financialstatements of PricewaterhouseCoopersLLP for the year ended 30 June 2005.This Members’ report should be read in conjunction with the other sections of this Annual Report headed Chairman,Clients, People, Firm, Financial and Global.

StructureThe consolidated financial statementscomprise the accounts ofPricewaterhouseCoopers LLP and itssubsidiary undertakings (the ‘Group’).The principal subsidiary undertakings of PricewaterhouseCoopers LLP are setout in note 20 to the financial statements;there were no branches of the LLPoutside the UK. The Group’s principalactivity is the provision of professionalservices, managed under three keybusiness clusters of Assurance,Tax and Advisory. During the current year no single client represented more than1.75% of turnover (2004: 1.5%).

TurnoverTurnover grew 12% to £1,780m,compared to a 5% growth in the prioryear. Our growth represents thecontinued execution of our strategy of leading in our market place based on differential quality and being a greatplace to work for all our people.

AssuranceOverall Assurance turnover increasedstrongly by 18% to £861m, compared to an 11% growth in the prior year.Advice to clients on International

Financial Reporting Standards transitionand Sarbanes-Oxley reporting, amountingin total to approximately £100m, fuelledmuch of the growth in both core auditand other non-recurring Assurance andregulatory reporting services. TransactionServices performed well, particularly in the second half of the year, withincreased turnover of 9% reflecting our strong position in the private equitymarket and clients widening the range of services required to support their deals.Provision of Actuarial services is dividedbetween insurance teams in Assuranceand pensions teams in Tax. Both were in heavy demand.

TaxTax showed a healthy return to growth,with turnover increasing 8% to £514m,compared to a 4% fall in the prior year.This was fuelled by winning work at non-audit clients, where focused targeting isreaping dividends. Turnover growth waslower in services to audit clients, largelyreflecting the impact of regulation on thebuying decisions of our clients. HumanResource Services turnover growth of8% was aided by our position as aleading provider of HR consultingservices. The pensions actuarial servicesteam continued to provide advice toclients as a result of the intense nationalfocus on pensions and proposedchanges to pensions legislation.

AdvisoryAdvisory turnover increased a further 9%to £405m, on the back of an 8% increasein the prior year. Advisory comprises a number of services. PerformanceImprovement Consulting grew strongly at 28%, benefiting from increased market

1.8billion poundsof turnover

Financial

Revenue RecognitionFollowing clarification issuedduring the year by the UrgentIssues Task Force (UITF) of theAccounting Standards Board,the Group’s revenue recognitionpolicy has been revised.As explained in note 1 to thefinancial statements, the mainimpact is that the majority of theGroup’s turnover is now recognisedas contract activity progresses,rather than recognising turnoverwhen each client assignment issubstantially complete.

The main effect of this changein accounting policy is to increaseturnover and profit recognisedin the prior financial year by £15m,and to increase cumulativereported profit by £92m, as a prioryear adjustment. All analyses inthis Annual Report and Accountshave been restated for theseadjustments.


Making it EasierDuring the year we launcheda comprehensive internalprogramme, Making it Easier,which aims to reduce the overalladministrative burden in thebusiness, simplify businessprocesses further and alsoenhance the level of systemseducation and training. This shouldboth make life easier for all in thefirm and free up more time for ourpeople to do those things thatreally add value for our clients.

The current focus of Making itEasier is targeted at the three majorissues identified by our people ashaving the most immediate impact:reducing the e-mail burden,ensuring easier and betterelectronic connectivity from ourteams working at client sites anddriving further enhancements andsimplifications to our engagementmanagement systems.

Continued financial progress

www.pwc.com/uk 37

awareness, a string of project wins and the continued recruitment anddevelopment of high quality, specialistexpertise. Offsetting this growth was a 6% decline in Forensic and BusinessRecovery Services turnover, the latterreflecting the benign UK economy andcounter-cyclical nature of that business.Corporate Finance benefited however,with 14% turnover growth achievedthrough careful targeting within ourchosen deal markets.

Operating costsWe continued to retain tight control overcosts. However, some increases wereunavoidable. Sharp rises resulted fromensuring we comply with the increasingburden of regulation and from recruitingand training people to handle the increasein activity.

Operating costs include expenses anddisbursements on client assignments,which increased by £14m to £221mduring the year. Staff costs increased£89m to £769m, reflecting the impact of pay awards, a 42% increase in staffbonuses to £52m and an increase inaverage monthly staff headcount ofapproximately 1,000 people over the year to some 13,750 people.

Depreciation and amortisation chargesdeclined £5m to £42m, reflecting lowerlevels of technology investment followingcompletion of our major financial andcustomer relationship managementsystems implementations in the prior year.Other operating charges, which increasedby £35m to £279m, include recruitmentcosts, investment in learning anddevelopment, accommodation and

technology to support our great place to work agenda and centrally incurredcosts. Other operating charges anddepreciation, expressed as a percentageof turnover, reduced to 18.0% comparedto 18.4% in the prior year.

Shared servicesOur client facing businesses are supportedby a professional team of internal sharedservice experts. We continue to pursueour strategy of creating a flexible andscaleable suite of shared services. Wemeasure the quality of our service byreference to both service level agreementsand quarterly Your Services Your Saysurveys. Our latest survey results showthat internal service satisfaction levelshave increased from 82% in the prior yearto 85% in 2005.

Staff pensionsSome 9,000 of our staff are activemembers of the firm’s various pensionsarrangements, with 2,400 staff beingmembers of, or having eligibility to join,one of the firm’s defined benefitarrangements.

The defined benefit schemes arecurrently subject to their triennialactuarial review, the results of whichshould be available later in 2005. Theschemes were last formally valued in2002, although as a result of adverseconditions since then the Group adopteda funding plan in October 2003 designedto eliminate the deficits in these schemesover a period of 10 years. This isreflected in the £80m prepaymentin the balance sheet.

Making it Easier workshops wereheld with over 1,000 people acrossthe business


38 www.pwc.com/uk

The informal valuations carried out for thepurpose of FRS17 disclosures (note 19 tothe financial statements) indicate a deficitbefore deferred tax of £298m this year,compared to the prior year figure of£203m. The increase in the FRS17 deficitreflects primarily the decrease in the long-term discount rate used to value schemeliabilities and the impact of assuminglonger periods of pensions in paymentdue to increases in life expectancy, offsetby improvements in equity markets overthe 12 months ended 30 June 2005.

Operating profitTurnover growth of 12%, offset by an11% increase in costs, led to an overall16% growth of £64m in operating profitto £469m.

Net assetsNet assets of £556m were, in total, up£96m on the previous year, with cashresources increasing £162m to £227m.Fixed assets declined £20m, reflecting a reduced level of current year investmentspend and a full year’s depreciationcharge on prior year expenditure. Debtorsdecreased by £41m, including a £38mdecrease in trade debtors, representingstrong working capital managementduring a period of growth, offset by a£19m increase in pension prepaymentsand a £28m increase in amounts duefrom members as a result of higher taxcosts in subsidiary undertakings due tonew UK transfer pricing legislation. Therewas an overall £4m reduction inprovisions, primarily due to a reduction in claims provisions offset by an increasein the deferred tax provision arising fromthe staff pensions prepayment.

Members’ other interestsA detailed analysis of members’ otherinterests of £556m (2004: £460m) may be found in note 15 to the financialstatements. These comprise personalcapital subscribed by members of £100m(2004: £94m) and £456m of undistributedmembers’ reserves (2004: £366m). Capitalof £8m was repaid during the year toretiring members (2004: £10m).

Creditor payment policyWe seek to agree commercial paymentterms with our suppliers and, providedperformance is in accordance with theagreed terms, to make paymentsaccordingly. The number of daysoutstanding between receipt of invoicesand date of payment, calculated byreference to the amount owed to theGroup’s trade creditors at the year endas a proportion of the total amountsinvoiced by suppliers during the year,was 16 days (2004: 15 days).

TreasuryOur treasury focus is on ensuring thereare sufficient funds to finance thebusiness. Surplus cash, where it arises,is invested in short-term money marketdeposits. As more fully explained in note21 to the financial statements, hedging is undertaken to reduce risk and nospeculative foreign exchange trading is permitted.

FinancingThe firm is financed through acombination of members’ capital,undistributed profits and borrowing

Financial

05

Net assets£m

04

556

460

+21%

+2%

05

Operating profit£m

04

469 +16%

+7%

03 449

405

03 380

We held 28 events with 2,700attendees and distributed over15,000 overnight e-mails to helpmake sense of the Budget

4569_AR05_7Financial.qxd 22/8/05 12:40 pm Page 38

Increased balancesheet strength

www.pwc.com/uk 39

facilities. Members’ capital contributionsare determined by the ManagementBoard, having regard to the workingcapital needs of the business. Thesecapital contributions are set by referenceto the individual member’s equity unitprofit share proportion and are repayable,at par, following the member’s retirement.

Our bank facilities, which totalled £150mat the year-end (2004: £128m), wererenewed during the year under a five yeararrangement terminating in January 2010.Our facilities, which are spread across a number of banks, are maintained atlevels sufficient to meet the expectedpeak cash requirements of the business.We are satisfied that our facilities willmaintain a prudent buffer over ourforecast peak borrowing requirementsover the next 12 months.

Capital expenditureCapital expenditure of £27m (2004: £45m)in the year consisted mainly of ITpurchases, in particular the purchaserather than the lease of personalcomputers, investment in new systems,and our continued investment inrefurbishing offices.

Total tax contributionThe Group contributes significantly to the Exchequer through the payment andcollection of a number of taxes. Duringthe year we paid a range of businesstaxes in the normal course of business,amounting to £94m (2004: £87m). As apeople business, our main business taxpayment is the National InsuranceContributions (NIC) which we pay inrespect of our employees, amounting this year to £62m (2004: £55m).

We also collected £384m (2004: £339m)in taxes on behalf of Government in theyear, the most significant of which wereVAT and PAYE. These taxes are areflection of the value added and jobcreation activities of the firm andrepresent part of our wider economiccontribution to both society and to the overall UK tax take.

The majority of the Group’s tax on profitand capital gains is borne directly byindividual members and is therefore notreflected in the financial statements of the LLP or the Group. Members of the LLP bear income tax, broadly at 40%on their individual share of the profits of the LLP, together with a further 1%national insurance contribution. TheGroup administers the payment of thesetaxes and, as explained below, makesperiodic distributions of profit to enablemembers to settle their tax liabilities withHM Revenue and Customs.

Members’ profit sharesMembers are remunerated solely out ofthe profits of the firm and are personallyresponsible for funding their pensionsand other benefits. Final allocation ofprofits to members is made by theManagement Board after assessing eachmember’s contribution for the year. The Supervisory Board oversees andapproves this process.

Each member’s profit share comprisesthree interrelated profit-dependentcomponents:

• responsibility income – reflecting themember’s sustained contribution andresponsibilities;

Business taxes 2005 2004paid £m £m

Employers’ NIC paid 62 55Business rates 11 12Corporation tax 11 7PAYE/NIC on benefits 5 6Insurance Premium Tax 1 2Other 4 5

Total business 94 87taxes paid

Business taxes 2005 2004collected £m £m

Net VAT collected 201 178PAYE collected 150 131Employees’ NIC collected 33 30

Total business 384 339taxes collected

Total tax contribution


• performance income – reflecting how a member and his/her team(s) haveperformed; and

• equity unit income – reflecting theoverall profitability of the firm.

Each member’s performance income,which in the current year represents on average approximately 35% of theirprofit share (2004: 25%), is determinedby assessing achievements against anindividually tailored balanced scorecardof objectives based on the member’s role.

Regard is given to ensuring that we deliverquality services and that we maintain our independence and integrity, includingin relation to the provision of non-auditservices to our audit clients.

There is transparency amongst themembers of the total income allocated to each individual.

DrawingsThe overall policy for members’ drawingsis to distribute the majority of the profitduring the financial year, taking intoaccount the need to maintain sufficientfunds to settle members’ income taxliabilities with HM Revenue and Customsand to finance the working capital andother needs of the business.

The Management Board sets the level of members’ monthly drawings and interimprofit allocations, based on a percentageof their individual responsibility income.The Supervisory Board approves thisprocess. The final allocation anddistribution of profits to individual

40 www.pwc.com/uk

members is made once their performancehas been assessed and the annualfinancial statements have been approved.

Political donationsThe firm does not make any cash nor, as a general rule, in-kind donations to any political party or other groups with a political agenda. In exceptionalcircumstances, secondments or othercontributions may be permitted, butrequire the agreement of the ManagementBoard. In considering any request, theManagement Board has regard to thepossible impact on clients of the firm and the firm’s overall reputation.

During the year we provided a total of less than 150 hours of free technicalsupport to political parties (2004: lessthan 200 hours).

In the interests of the firm and its clients,the firm also engages in discussion withgovernment, opposition parties, MEPs,councillors and other related parties toseek to improve legislation or proposedlegislation, to ensure the exchange ofrelevant information and to encouragethe understanding of the mechanisms of legislative decision making.

Going concernThe Management Board has areasonable expectation that the firm has adequate financial resources to meetits operational needs for the foreseeablefuture and therefore the going concernbasis has been adopted in preparing the financial statements.

Financial

Designated membersThe designated members(as defined in the Limited LiabilityPartnerships Act 2000) ofPricewaterhouseCoopers LLP areKieran Poynter, John Berriman,Owen Jonathan and Andrew Smith.They all served during the wholeof the year. Paul Boorman alsoserved as a designated memberduring the year until he steppeddown on 30 June 2005.

Key accounting policiesOur accounting policies aredescribed in full in note 1 to thefinancial statements. Key elementsof our accounting policies include:revenue recognition, the estimationof claims provisions and theassumptions used as the basisof accounting for staff pensions.


International FinancialReporting StandardsFollowing the introduction ofsuitable enabling legislation, theGroup has the option to adoptInternational Financial ReportingStandards (IFRS) for the yearending 30 June 2006. A finaldecision will be taken during thecourse of the year.

The principal potential changesunder IFRS, compared to ourcurrent accounting policies,include the accounting treatmentof staff pensions, members’capital and fixed assets andassociated presentation anddisclosure changes.

Sound financial management

www.pwc.com/uk 41

Statement of members’responsibilities in respectof the financial statementsThe Companies Act 1985, as applied to Limited Liability Partnerships, requiresthe members to prepare financialstatements for each financial year thatgive a true and fair view of the state ofaffairs of both PricewaterhouseCoopersLLP and the Group and of the profit orloss of the Group for that period. Inpreparing those financial statements the members are required to:

• select suitable accounting policies andthen apply them consistently, subject to any changes disclosed and explainedin the financial statements;

• make judgements and estimates thatare reasonable and prudent;

• state whether applicable accountingstandards have been followed, subjectto any material departures disclosedand explained in the financialstatements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume the LLPor Group will continue in business.

The members are also responsible forkeeping proper accounting records thatdisclose with reasonable accuracy at anytime the financial position of the LLP andthe Group and enable them to ensurethat the financial statements comply withthe Companies Act 1985, as applied toLimited Liability Partnerships. They arealso responsible for safeguarding the

assets of the LLP and Group and fortaking reasonable steps for theprevention and detection of fraud and other irregularities.

These responsibilities are fulfilled by the Management Board on behalf of the members. The Management Boardconfirms that it has complied with theabove requirements in preparing thefinancial statements.

AuditorsThe independent auditors, Horwath ClarkWhitehill LLP, will be proposed forreappointment.

On behalf of the Management Board

Kieran Poynter, Chairman12 August 2005


42 www.pwc.com/uk

Financial

Independent auditors’ report to the members of PricewaterhouseCoopers LLP

We have audited the financial statementswhich comprise the profit and lossaccount, statement of recognised gainsand losses, balance sheets, cash flowstatement and the related notesnumbered 1 to 23. These financialstatements have been prepared inaccordance with the accounting policiesset out therein.

This report is made solely to the LLP’smembers, as a body, in accordance withthe Companies Act 1985, as applied tolimited liability partnerships. Our auditwork has been undertaken so that wemight state to the LLP’s members thosematters that we are required to state tothem in an auditors’ report and for noother purpose. To the fullest extentpermitted by law, we do not accept orassume responsibility to anyone otherthan the LLP and the LLP’s members asa body for our audit work, for this report,or for the opinion we have formed.

Respective responsibilities of themembers and auditorsThe members’ responsibilities forpreparing the Annual Report and thefinancial statements in accordance withapplicable United Kingdom law andaccounting standards are set out in themembers’ responsibility statement in the Members’ Report.

Our responsibility is to audit the financialstatements in accordance with relevantlegal and regulatory requirements andUnited Kingdom auditing standardsissued by the Auditing Practices Board.

We report to you our opinion as towhether the financial statements give a true and fair view and are properlyprepared in accordance with theCompanies Act 1985, as applied tolimited liability partnerships. We alsoreport to you if, in our opinion, the LLP

has not kept proper accounting recordsor if we have not received all theinformation and explanations we requirefor our audit.

We read the other information containedin the Annual Report and consider theimplications for our report if we becomeaware of any apparent misstatements or material inconsistencies with thefinancial statements. The other informationis set out in the sections headedChairman, Clients, People, Firm, Financial and Global.

We have reviewed the ‘Managing risk and quality’ statement in the sectionheaded Firm. We have not been asked to consider whether the LLP’s statementson internal control cover all risks andcontrols, or to form an opinion on theeffectiveness of the LLP’s corporategovernance procedures or its risks, controlor quality procedures. Nothing has cometo our attention during the course of ouraudit which would indicate that the othermatters set out in ‘Maintaining quality’and ‘Complying with regulation’statements in the section headed Firmare not described appropriately.

Basis of audit opinionWe conducted our audit in accordancewith United Kingdom auditing standards.An audit includes examination, on a testbasis, of evidence relevant to theamounts and disclosures in the financialstatements. It also includes anassessment of the significant estimatesand judgements made by members in the preparation of the financial statements,and of whether the accounting policiesare appropriate to the LLP’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the financial statementsare free from material misstatement,whether caused by fraud or otherirregularity or error. In forming our opinionwe also evaluated the overall adequacyof the presentation of information in thefinancial statements.

OpinionIn our opinion the financial statementsgive a true and fair view of the state ofaffairs of the LLP and the Group at 30June 2005 and of the profit and cashflows of the Group for the year then endedand have been properly prepared inaccordance with the Companies Act 1985,as applied to limited liability partnerships.

Based on the work undertaken during the course of our audit, and having madelimited additional enquiries, we confirmthat the descriptions of the five identifiedkey elements of the risk managementsystems described in ‘Managing risk and quality’ properly reflect theprocesses concerned.

Horwath Clark Whitehill LLPChartered Accountantsand Registered Auditors,London12 August 2005

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www.pwc.com/uk 43

Consolidated profit and loss accountfor the year ended 30 June 2005

Notes 2005 2004Restated

£m £m

Turnover 2 1,780 1,583

Operating costsOther external charges: expenses and disbursementson client assignments (221) (207)Staff costs 3 (769) (680)Depreciation and other amounts written off tangibleand intangible fixed assets 4 (42) (47)Other operating charges 4 (279) (244)

(1,311) (1,178)

Operating profit 469 405Net interest receivable 5 3 1

Profit on ordinary activities before taxation 472 406Tax on profit on ordinary activities in corporate subsidiaries 6 (4) (7)

Profit for the financial year before members’remuneration and profit shares and availablefor division among members 15 468 399

All amounts relate to continuing operations. No members received salaried remuneration. The amounts shown for profit for thefinancial year before members’ remuneration and profit shares and available for division among members are the same as the profiton ordinary activities after taxation.

Consolidated statement of total recognised gains and lossesfor the year ended 30 June 2005


£m £m

Profit and total recognised gains for the financial year 15 468 399

Prior year adjustment 1, 15 92

Total gains recognised since last annual report 560

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Financial


£m £m

Fixed assetsIntangible assets 8 1 4Tangible assets 9 113 128Investments 10 6 8

120 140

Current assetsDebtors

– Receivable within one year 525 580– Receivable after more than one year 86 72

11 611 652Short-term deposits 200 44Cash at bank and in hand 27 21

838 717

Creditors – amounts falling due within one year 12 (306) (297)

Net current assets 532 420

Total assets less current liabilities 652 560Provisions for liabilities and charges 14 (95) (99)

Net assets before loans and other debts due to members 557 461Loans and other debts due to members (1) (1)

Net assets 556 460

Members’ other interestsMembers’ capital 15 100 94Other reserves 15 456 366

Members’ other interests 556 460

Total members’ interestsLoans and other debts due to members 1 1Members’ other interests 556 460Amounts due from members (included in Debtors) (28) (1)

Total members’ interests 15 529 460

The financial statements on pages 43 to 69 were signed on 12 August 2005 on behalfof the members of PricewaterhouseCoopers LLP by:

Kieran Poynter John Berriman

Consolidated balance sheetat 30 June 2005

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www.pwc.com/uk 45

PricewaterhouseCoopers LLP balance sheetat 30 June 2005


£m £m

Fixed assetsIntangible assets 8 – 2Tangible assets 9 16 18Investments 10 14 16

30 36

Current assetsDebtors

– Receivable within one year 491 565– Receivable after more than one year 34 32

11 525 597Short-term deposits 200 44Cash at bank and in hand 17 35

742 676

Creditors – amounts falling due within one year 12 (164) (186)

Net current assets 578 490

Total assets less current liabilities 608 526Provisions for liabilities and charges 14 (74) (80)

Net assets before loans and other debts due to members 534 446Loans and other debts due to members (1) (1)

Net assets 533 445

Members’ other interestsMembers’ capital 15 99 94Other reserves 15 434 351

Members’ other interests 533 445

Total members’ interestsLoans and other debts due to members 1 1Members’ other interests 533 445Amounts due from members (included in Debtors) – (1)

Total members’ interests 15 534 445

The financial statements on pages 43 to 69 were signed on 12 August 2005 on behalfof the members of PricewaterhouseCoopers LLP by:

Kieran Poynter John Berriman

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Financial

Notes 2005 2004£m £m

Net cash inflow from operating activities 16 566 318Returns on investments and servicing of finance 17 2 1Taxation – corporation tax paid (11) (8)Capital expenditure and financial investment 17 (24) (34)Acquisitions and disposals 17 – 48Transactions with members 17 (371) (389)

Net cash inflow (outflow) before management of liquid resources and financing 162 (64)Management of liquid resources 17 (156) 64

Increase in cash in the year 6 –

Reconciliation of increase in net cash to movement in net funds

Notes 2005 2004£m £m

Increase in cash in the year 6 –Net cash inflow (outflow) to increase liquid resources 156 (64)

Increase (decrease) in net funds resulting from cash flows 162 (64)

Net funds at beginning of year 65 129

Net funds at end of year 18 227 65

Consolidated cash flow statementfor the year ended 30 June 2005

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1 Accounting policies

The following accounting policies havebeen applied consistently in dealing withitems that are considered material inrelation to the financial statements, withthe exception of the change inaccounting policy for revenue recognitionas described below.

Basis of accountingThe financial statements have beenprepared under the historical costconvention, in accordance with applicableaccounting standards and the Statementof Recommended Practice, Accountingby Limited Liability Partnerships.

Basis of consolidationThe financial statements consolidate the results and financial position ofPricewaterhouseCoopers LLP and all its subsidiary undertakings (the ‘Group’).Businesses acquired or disposed ofduring the year are accounted for usingacquisition accounting principles from or up to the date control passed.

As permitted by section 230 of theCompanies Act 1985, no separate profitand loss account is presented forPricewaterhouseCoopers LLP.

Change in accounting policies –revenue recognitionFollowing clarification issued during theyear by the Urgent Issues Task Force(UITF) of the Accounting Standards Board,the Group’s revenue recognition policyhas been revised. The main impact is thatthe majority of the Group’s turnover isnow recognised as contract activityprogresses, rather than when each clientassignment is substantially complete.

The main effect of this change inaccounting policy is to increase turnoverand profit recognised in the prior financialyear by £15m, and to increase prior yearcumulative reported profit by £92m(2003 – £77m), as a prior year adjustment.Turnover and profit for the current financialyear would have been lower by £16munder the previous accounting policy.

The prior year comparatives and noteswithin these financial statements have all been restated for this prior yearadjustment, including the notes onturnover and segmental analysis,members’ profit shares, debtors, creditors,members’ interests and cash flow.

TurnoverTurnover represents the fair value ofservices provided during the year onclient assignments. Turnover is recognisedas contract activity progresses and theright to consideration is earned. Fairvalue reflects the amount expected to be recoverable from clients and is basedon the time spent, skills and expertiseprovided and expenses incurred.Turnover excludes Value Added Tax.

Turnover in respect of contingent feeassignments (over and above any agreed minimum fee which is recognisedas above) is recognised in the periodwhen the contingent event occurs andcollectability of the fee is assured.

Unbilled turnover on individual clientassignments is included as accruedincome within debtors. Where individualon-account billings exceed revenuerecognised on client assignments, theexcess is classified as deferred incomewithin creditors.

Lease costsOperating lease rentals are charged toprofit on a straight line basis over theperiod of the lease.

Tangible fixed assetsTangible fixed assets are stated at costless accumulated depreciation.Depreciation is provided on a straight line basis over the following estimateduseful lives:

Freehold property 50 yearsLeasehold property 50 years or shorter

leasehold termFittings, furnishings & equipment:– Office plant 20 years or shorter

leasehold term– Office fittings 10 years or shorter

leasehold term– Office equipment 3 to 5 yearsSoftware & computer equipment 3 to 5 years

Costs that are directly attributable to thedevelopment of new business applicationsoftware and that are incurred prior to thedate that the software becomesoperational are capitalised. External andincremental internal costs are capitalisedonly to the extent that they enhance thefuture economic benefits of the business.

Repairs and maintenance costs arecharged to the profit and loss account as incurred.

Notes to the financial statementsfor the year ended 30 June 2005

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Financial

1 Accounting policies (continued)

GoodwillGoodwill arising on the acquisition ofsubsidiary undertakings and businesses,representing the excess of the fair valueof the consideration given and associatedcosts over the fair value of the identifiableassets and liabilities acquired, iscapitalised. Goodwill is amortised to nilby equal annual instalments over itsestimated useful economic life, normallya period of five to seven years. If thecarrying value of goodwill is consideredto exceed its recoverable amount, animpairment charge is included inoperating profit. Any profit or loss ondisposal of goodwill arising from the saleof a subsidiary undertaking or business is included as part of the profit or loss ondisposal of that undertaking or businessin the profit and loss account.

Fixed asset investmentsFixed asset investments are included at cost less any provision required forimpairment in value. Income from theseinvestments is recognised whenentitlement is established.

ProvisionsProvision is made for the net presentvalue of onerous lease commitments in respect of surplus property afterallowance for anticipated sublet rentalincome, and to restore premises to theiroriginal condition upon vacating them.Present value is based on discountedfuture cash flows.

In common with comparable professionalpractices, the Group is involved in anumber of disputes in the ordinarycourse of business which may give riseto claims. Provision is made in thefinancial statements for all suchcircumstances where costs are likely tobe incurred and represents the cost ofdefending and concluding claims.

The Group carries professional indemnityinsurance and no separate disclosure ismade of the cost of claims covered byinsurance as to do so could seriouslyprejudice the position of the Group.

Pension costs and other post-retirement benefitsStaff pension costs relating to theGroup’s defined benefit pension schemesare charged against profit in a systematicmanner over the estimated service livesof employees in the schemes, based onadvice from independent actuaries.Formal actuarial valuations are carriedout every three years. Surpluses anddeficits arising on periodic actuarialvaluations of the pension funds are spreadover the average estimated remainingservice lives of current employees. Staffpension costs relating to the Group’sdefined contribution schemes arecharged when they become payable.

Members are required to make their ownprovision for pensions and do so mainlythrough contributions to personalpension policies and other appropriateinvestments. Members, in their capacityas partners in the predecessorpartnership, PricewaterhouseCoopersUnited Kingdom Partnership, haveagreed to pay pension annuities tocertain former partners of thepredecessor partnership and the widowsand dependants of deceased formerpartners. These annuities are personalobligations of the members and are notobligations of, or guaranteed in any wayby, PricewaterhouseCoopers LLP or itssubsidiary undertakings. Accordingly,these annuities are not dealt with in thesefinancial statements.

Foreign currenciesTransactions in foreign currencies arerecorded at the rate of exchange ruling at the date of the transaction. Monetaryassets and liabilities denominated in

foreign currencies are translated usingthe rates of exchange ruling at thebalance sheet date and the gains andlosses on translation are included in theprofit and loss account.

Allocation of profits and drawingsDuring the year the Management Boardsets the level of interim profit allocationsand members’ monthly drawings afterconsidering the Group’s working capitalneeds. To the extent that interim profitallocations exceed drawings then theexcess profit is included in the balancesheet under Loans and other debts dueto members. Should drawings exceed the allocated profits then the excess isincluded in Debtors. The same treatmentis used for members who retire duringthe year. The final allocation of profitsand distribution to members is madeafter assessing each member’scontribution for the year and after theannual financial statements are approved.Unallocated profits are included in Otherreserves within Members’ other interests.

TaxationIncome tax payable on the LLP’s profitsis solely the personal liability of theindividual members and consequently isnot dealt with in these financial statements.

The companies dealt with in theseconsolidated financial statements aresubject to corporation tax based on theirprofits for the financial year. Deferred taxis recognised, without discounting, on a full provision basis on all timingdifferences in the companies.

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2 Turnover and segmental analysis

Turnover arises entirely in the UK and Channel Islands. An analysis of turnover and operating profit is set out below; prior yearcomparatives have been restated in accordance with the change in revenue recognition accounting policy described in note 1.

Turnover Operating profit

2005 2004 2005 2004Restated Restated

£m £m £m £m

Assurance 861 732 220 185Tax 514 478 144 125Advisory 405 373 105 95

1,780 1,583 469 405

Costs that are specifically attributable are allocated direct to individual segments. The majority of the Group’s central costs areallocated to segments under bases determined within documented service level agreements and all other central costs areapportioned having regard to the appropriate cost driver.

Inter-segmental turnoverThe previous table shows only third party turnover. Inter-segmental turnover, which has been eliminated on consolidation,is set out below:

2005 2004Restated

£m £m

Assurance 12 11Tax 35 32Advisory 38 23

85 66

Geographic analysis of turnoverTurnover can be analysed by client location as follows:

2005 2004Restated

£m £m

UK and Channel Islands 1,586 1,407Rest of Europe 89 73North America 73 87Rest of World 32 16

1,780 1,583

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2 Turnover and segmental analysis (continued)

Net asset analysisThe segmental analysis of net assets is as follows:

2005 2004Restated

£m £m

Assurance 156 145Tax 127 173Advisory 73 83Non-operating assets and liabilities not allocated 200 59

556 460

Net asset interests are principally in the UK. Non-operating assets and liabilities not allocated comprise cash at bank and in hand,short-term deposits and corporation and deferred tax balances.

3 Staff costs

2005 2004Restated

£m £m

Salaries 658 582Social security costs 71 58Other pension costs (note 19) 40 40

769 680

Prior year staff costs have been restated by decreasing salaries by £14m and increasing pension costs by £14m to reflect theflexible benefit arrangement that is in place for employees who are members of defined contribution pension schemes.

The average monthly number of employees during the year was:

2005 2004Restated

Number Number

Assurance 6,136 5,415Tax 3,172 3,106Advisory 2,381 2,232Shared Services and National Functions 2,065 2,014

13,754 12,767

Employee numbers for 2004 have been restated to reflect an internal restructuring which resulted in the transfer of 107 employeesto Shared Services and National Functions from other segments.

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4 Other operating costs

2005 2004£m £m

Depreciation and other amounts written offtangible and intangible fixed assets:– depreciation of owned assets (note 9) 39 45– amortisation of goodwill (note 8) 3 2

42 47

Included in other operating charges are the following costs:Operating lease rentals:– land and buildings 67 72– plant and machinery 10 9

77 81

Group audit fees and expenses for the year were £0.3m (2004 – £0.5m) of which the amount relating to the parent LLP was £0.2m(2004 – £0.4m). There were no fees paid to Horwath Clark Whitehill LLP for non-audit services (2004 – £nil).

5 Net interest receivable

2005 2004£m £m

Interest payable and similar charges: – on bank overdrafts (2) (1)Interest receivable 4 2Unwinding of discount 1 –

3 1

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6 Tax on profit on ordinary activities

These financial statements do not incorporate any charge or liability for taxation on the results of the LLP, as the relevant income taxis the responsibility of the individual members. The charge to tax, which arises in the corporate entities included within thesefinancial statements, is:

2005 2004£m £m

Total current tax comprising UK corporation tax charge (credit) at 30% based onprofits for the year (see reconciliation below) 31 (2)Compensating payment due from members (see note below) (28) –Deferred tax arising from the origination and reversal of timing differences (note 14) 1 9

Tax on profit on ordinary activities in corporate subsidiaries 4 7

Following changes in UK transfer pricing legislation, the UK corporation tax charge in subsidiary undertakings has increased by£28m in the year. The cost of this is offset by a compensating payment to be made by members direct to the relevant corporateentities.

The following table reconciles the tax charge at the standard rate to the actual tax charge (credit).2005 2004

£m £m

Profit on ordinary activities of corporate entities before tax 5 8

Tax charge at UK standard rate of 30% 1 2Transfer pricing charge 28 –Expenses not deductible for tax purposes 5 5Capital allowances less than depreciation 2 3Timing differences in respect of movements in pension prepayments (3) (11)Adjustments in respect of previous years (2) –Other timing differences – (1)

Total current tax (above) 31 (2)

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7 Members’ profit shares

The basis on which profits are shared among members is set out in note 1.

The average monthly number of members during the year was:

2005 2004Number Number

Assurance 333 333Tax 223 229Advisory 176 164Other, including members fulfilling roles in the PwC global network 23 26

755 752

The average profit per member is calculated by dividing the profit for the financial year before members’ remuneration and profitshares by the average number of members:

2005 2004Restated

£000 £000

Average profit per member 620 531

The total amount invested by members in the business, represented by members’ capital and undistributed profits in Members’other interests, at 30 June 2005, divided by the number of members at that date, amounts to an average investment per memberof £738,000 (2004 restated – £619,000).

The profit attributable to the Chairman, the member with the largest entitlement to profit, is £2,100,000 (2004 – £1,750,000). Hisinvestment in the business, represented by his share of Members’ other interests, at 30 June 2005 was £2,420,000(2004 restated – £2,055,000).

8 Intangible assets – goodwillGroup LLP

£m £m

Cost

At beginning of year and at end of year 10 3

AmortisationAt beginning of year 6 1Charge for the year 3 2

At end of year 9 3

Net book value at end of year 1 –

Net book value at end of prior year 4 2

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9 Tangible assets

GroupFreehold Leasehold Fittings, Computer Totalproperty property furnishings & equipment

equipment & software£m £m £m £m £m

CostAt beginning of year 5 34 104 152 295Additions – – 6 21 27Disposals and write-offs – (2) (5) (13) (20)

At end of year 5 32 105 160 302

DepreciationAt beginning of year 1 20 51 95 167Charge for the year – 1 10 28 39Disposals and write-offs – (1) (5) (11) (17)

At end of year 1 20 56 112 189

Net book amount at end of year 4 12 49 48 113

At end of prior year 4 14 53 57 128

Capital commitments contracted but not provided for at 30 June 2005 amounted to £2m (2004 – £nil).

LLPLeasehold Fittings, Total

property furnishings &equipment

£m £m £m

CostAt beginning of year 29 5 34Disposals (1) – (1)

At end of year 28 5 33

DepreciationAt beginning of year 12 4 16Charge for the year 1 1 2Disposals and write-offs (1) – (1)

At end of year 12 5 17

Net book amount at end of year 16 – 16

At end of prior year 17 1 18

Leasehold property (Group & LLP) includes a long lease with net book value of £5m (2004 – £5m).

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10 Investments

Group LLP£m £m

Investments in Group undertakingsAt beginning of year and at end of year – 8

Investments in Group undertakings are stated at cost. A list of principal subsidiary undertakings is given in note 20. There were nomovements in shares held by the LLP in Group undertakings in the year.

Other investmentsCost

At beginning of year and at end of year 9 8

ProvisionsAt beginning of year 1 –Charge for year 2 2

At end of year 3 2

Cost less provisions at end of year 6 6

Cost less provisions at end of prior year 8 8

The principal investments comprise trade investments in entities through which PricewaterhouseCoopers LLP and otherPricewaterhouseCoopers member firms around the world provide services to global clients.

Total investments at end of year 6 14

Total investments at end of prior year 8 16

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11 Debtors

Group Group LLP LLP2005 2004 2005 2004

Restated Restated£m £m £m £m

Receivable within one year:Client debtors 281 293 278 290Due from overseas PricewaterhouseCoopers member firms 7 33 24 49

Trade debtors 288 326 302 339Amounts owed by Group undertakings – – – 6Amounts due from members (note 6) 28 1 – 1Other debtors 21 38 15 26Prepayments 27 38 13 16Accrued income 161 177 161 177

525 580 491 565

Other debtors (Group) include £nil (2004 – £7m) corporation tax recoverable. Accrued income has been restated in accordance withthe change in revenue recognition accounting policy described in note 1.

Receivable after more than one year:Other debtors 6 11 6 11Prepayments – pension prepayments (note 19) 80 61 28 21

86 72 34 32

Other debtors receivable after more than one year (Group and LLP) comprise loan notes falling due in annual instalments until April2007, discounted to net present value.

Total debtors 611 652 525 597

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12 Creditors – amounts falling due within one year

Group Group LLP LLP2005 2004 2005 2004

Restated Restated£m £m £m £m

Trade creditors 25 19 1 1Amounts owed to Group undertakings – – 97 96Other creditors including taxation and social security (see below) 87 76 11 16Accruals 148 141 9 12Deferred income 46 61 46 61

306 297 164 186

Trade creditors (Group) include amounts owing to overseas PricewaterhouseCoopers member firms totalling £14m (2004 – £14m).Deferred income has been restated in accordance with the change in revenue recognition accounting policy described in note 1.

Other creditors including taxation and social security comprise:Corporation tax (2004 – £7m recoverable) 13 – – –Other taxes and social security 53 51 – –Other creditors 21 25 11 16

87 76 11 16

13 Commitments under operating leases

The Group’s annual commitment under non-cancellable operating leases, together with the obligations by maturity, is as follows:

2005 2004£m £m

Land and buildingsWithin one year 2 3Between one and five years 15 4Over five years 46 58

63 65

Other assetsWithin one year 6 6Between one and five years 3 4

9 10

Total 72 75

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14 Provisions for liabilities and charges

GroupDeferred tax Claims Property Total

£m £m £m £m

Balance at beginning of year 13 47 39 99Charged to profit and loss account 1 7 11 19Released unused during the year – (5) (1) (6)Cash payments – (6) (11) (17)

Balance at end of year 14 43 38 95

LLPClaims Property Total

£m £m £m

Balance at beginning of year 47 33 80Charged to profit and loss account 7 9 16Released unused during the year (5) (1) (6)Cash payments (6) (10) (16)

Balance at end of year 43 31 74

The provision for deferred tax comprises the following:

2005 2004£m £m

Accelerated capital allowances (1) 1Timing differences in respect of movements in pension prepayments 15 12

14 13

Provision at beginning of year 13 4Deferred tax charge in profit and loss account (note 6) 1 9

Provision at end of year 14 13

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timingdifferences reverse. There is no unrecognised deferred tax and there are no significant factors which are expected to affect futuretax charges apart from the origination and reversal of normal timing differences on fixed assets and creditors.

The claims provision is the estimated cost of defending and concluding claims. No separate disclosure is made of the cost ofclaims covered by insurance, as to do so could seriously prejudice the position of the Group.

A provision has been recognised for obligations under property contracts that are onerous, and to restore premises to their originalcondition upon vacating them. The provision has been estimated using current costs and has been discounted to present value ata rate of 5.00% (2004 – 5.75%). The provision covers residual lease commitments of up to 10 years and is after allowance forexisting or expected sublet rental income.

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15 Members’ interests

GroupMembers’ other interests

Restated (see note 1)

Members’ Other Total Loans and Totalcapital reserves other debts

due to (from)members

(see below)£m £m £m £m £m

Members’ interests at 1 July 2003 as previously reported 95 277 372 1 373Prior year adjustment – 77 77 – 77

Members’ interests at 1 July 2003 as restated 95 354 449 1 450Restated profit for the financial year ended 30 June 2004available for division among members – 399 399 – 399

Members’ interests after profit for the year 95 753 848 1 849Allocated profit – (387) (387) 387 –Introduced by members 9 – 9 – 9Repayments of capital (10) – (10) – (10)Drawings and distributions – – – (388) (388)

Members’ interests at 1 July 2004 as restated 94 366 460 – 460Profit for the financial year ended 30 June 2005available for division among members – 468 468 – 468

Members’ interests after profit for the year 94 834 928 – 928Allocated profit – (378) (378) 378 –Introduced by members 14 – 14 – 14Repayments of capital (8) – (8) – (8)Drawings and distributions – – – (377) (377)Compensating payment due to subsidiary undertakings (note 6) – – – (28) (28)

Members’ interests at 30 June 2005 100 456 556 (27) 529

Members’ interests at 1 July 2004 as restated include the prior year adjustment of £92m as described in note 1.

Analysis of loans and other debts due to (from) members:2005 2004 2003

£m £m £m

Loans and other debts due to members 1 1 1Amounts due from members included in Debtors (note 6) (28) (1) –

(27) – 1

Loans and other debts due to members represent allocated profits not yet paid to members and are due within one year.

The basis on which profits are allocated is described in note 1. Information concerning distributions to members and the numberof members is given in note 7.

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15 Members’ interests (continued)

In the event of a winding up, loans and other debts due to members rank equally with unsecured creditors; members’ other interestsrank after unsecured creditors and there is no additional protection afforded to creditors. Members’ capital contributions aredetermined by the Management Board having regard, inter alia, to the working capital needs of the business. Individual members’capital contributions are set by reference to equity unit profit share proportions and are not repayable until the member retires.

LLPMembers’ other interests

Restated (see note 1)

Members’ Other Total Loans and Totalcapital reserves other debts

due to (from)members

(see below)£m £m £m £m £m

Members’ interests at 1 July 2003 as previously reported 95 266 361 1 362Prior year adjustment – 77 77 – 77

Members’ interests at 1 July 2003 as restated 95 343 438 1 439Restated profit for the financial year ended 30 June 2004available for division among members – 395 395 – 395

Members’ interests after profit for the year 95 738 833 1 834Allocated profit – (387) (387) 387 –Introduced by members 9 – 9 – 9Repayments of capital (10) – (10) – (10)Drawings and distributions – – – (388) (388)

Members’ interests at 1 July 2004 as restated 94 351 445 – 445Profit for the financial year ended 30 June 2005available for division among members – 460 460 – 460

Members’ interests after profit for the year 94 811 905 – 905Allocated profit – (377) (377) 377 –Introduced by members 13 – 13 – 13Repayments of capital (8) – (8) – (8)Drawings and distributions – – – (376) (376)

Members’ interests at 30 June 2005 99 434 533 1 534

Members’ interests at 1 July 2004 as restated include the prior year adjustment of £92m as described in note 1.

Analysis of loans and other debts due to (from) members:2005 2004 2003

£m £m £m

Loans and other debts due to members 1 1 1Amounts due from members (included in Debtors) – (1) –

1 – 1

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16 Reconciliation of operating profit to net cash inflow from operating activities

2005 2004Restated

£m £m

Operating profit 469 405Depreciation 39 45Goodwill amortisation 3 2Increase in provisions on investments 2 –Decrease (increase) in debtors 62 (98)(Decrease) in creditors (4) (19)(Decrease) in provisions (5) (17)

Net cash inflow from operating activities 566 318

The relevant amounts for 2004 have been restated in accordance with the change in revenue recognition accounting policydescribed in note 1.

17 Analysis of cash flows

2005 2004£m £m

Returns on investments and servicing of financeInterest received 4 2Interest paid (2) (1)

2 1

Capital expenditure and financial investmentPurchase of tangible fixed assets (27) (44)Disposal of tangible fixed assets 3 5Purchase of investments – (2)Disposal of investments – 7

(24) (34)

Acquisitions and disposalsFinal proceeds from sale of consulting business – 49Acquisition of subsidiaries – (1)

– 48

Transactions with membersDrawings and distributions to members (377) (388)Capital contributions by members 14 9Capital repayments to members (8) (10)

(371) (389)

Management of liquid resources(Increase) decrease in short-term deposits with banks (156) 64

(156) 64

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Financial

18 Analysis of net funds

At 1 July Cash Flow At 30 June2004 2005

£m £m £m

Net CashCash at bank and in hand 21 6 27

Liquid resourcesShort-term deposits with banks 44 156 200

Net funds 65 162 227

19 Pension costs

The Group operates both defined benefit and defined contribution pension arrangements for its staff. The schemes are funded andtheir assets are held separately from those of the Group. The pension costs are assessed by independent actuaries.

The most significant defined benefit pension schemes are the PwC Pension Fund (‘PwC PF’) and the DH&S Retirement and DeathBenefits Plan (‘DH&S Plan’). Both schemes are closed to new employees and the DH&S Plan is closed to new members.

The following table sets out the principal data for these schemes:

PwC PF DH&S PlanDate of last actuarial review 31 March 2002 31 March 2002Valuation method Projected Unit Attained AgeAmortisation method Straight line Straight LineAverage remaining service lives 9.5 years 12 yearsMarket value of assets at date of actuarial review £465m £246m

Assumptions:– Rate of return on investments, pre retirement 7.3% 7.25%– Rate of return on investments, post retirement 5.8% 5.75%– Salary increases 4.3% 4.3%– Pension increases 2.8% 2.8%

Assets were valued at market value. As at the valuation dates these represented 98% and 90% of the benefits accrued to members,after having allowed for expected future increases in pensionable salaries, for the PwC PF and the DH&S Plan respectively.

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19 Pension costs (continued)

In accordance with actuarial recommendations and as agreed with the trustees, the Group paid contributions of £34m in the yearending 30 June 2005. The contributions will be reviewed and reassessed following the next formal actuarial valuations of theschemes which are currently being performed with an effective date of 31 March 2005.

The total pension charge determined under SSAP24 for the Group including defined contribution schemes was £40m (2004 –£40m). An analysis of the balance sheet movement and charges for the schemes is shown below:

PwC PF DH&S Plan Defined TotalContribution

Schemes£m £m £m £m

Opening prepayment (40) (21) – (61)Employer cash contributions (22) (12) (25) (59)

Pension cost:Regular cost 12 3 – 15Variations from regular cost (2) 2 – –Other costs – – 25 25

10 5 25 40

Closing prepayment (52) (28) – (80)

FRS17 additional disclosures requirementsFor the purposes of the disclosure requirements under FRS17, informal valuations were carried out as at 31 March 2005 and rolledforward to 30 June 2005 by qualified independent actuaries using the projected unit method. The actuaries are Aon Consulting forthe PwC PF and Mercer Human Resource Consulting for the DH&S Plan.

Certain employees under age 50 who were members of the Coopers & Lybrand Plan, a predecessor partnership pension plan, willbecome eligible to join the PwC PF at age 50 and receive enhanced benefits accruing over the period between age 50 and 60.Under the requirements of FRS17, although the employees are not yet members of the PwC PF, a provision is required to be heldin respect of the eligibility for future benefits. The cost of these benefits has been valued in accordance with FRS17 by the Group’sin-house actuaries and included within the amounts for the PwC PF.

Since the PwC PF and the DH&S Plan are closed, the current service cost, as a percentage of relevant members’ pay, is expectedto increase gradually as the members approach retirement.

The major assumptions used by the actuaries for FRS17 purposes were:

30 June 2005 30 June 2004 30 June 2003

Discount rate 5.00% 5.75% 5.25%Rate of increase in salaries 3.75% 4.00% 3.75%Rate of increase of pensions in payment 2.50% 2.75% 2.50%Inflation 2.50% 2.75% 2.50%

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The market value of assets in the schemes and the expected rates of return were:

Long-term Value at Long-term Value at Long-term Value atrate of return 30 June 2005 rate of return 30 June 2004 rate of return 30 June 2003

expected at expected at expected at30 June 2005 £m 30 June 2004 £m 30 June 2003 £m

Equities 7.45% 514 7.70% 437 7.75% 376Bonds 4.50% 414 5.30% 351 4.80% 302Cash 4.75% 20 4.50% 16 3.75% 6

948 804 684

The following amounts were measured in accordance with the requirements of FRS17:

2005 2004

PwC PF DH&S Plan Total PwC PF DH&S Plan Total£m £m £m £m £m £m

Total market value of assets 619 329 948 524 280 804Present value of scheme liabilities (808) (438) (1,246) (643) (364) (1,007)

Deficit in the scheme (189) (109) (298) (119) (84) (203)Related deferred tax asset 57 – 57 36 – 36

Net pension liability (132) (109) (241) (83) (84) (167)

The PwC PF is accounted for in PricewaterhouseCoopers Services, a subsidiary corporate entity, which provides for corporationtax on a full provision basis. The DH&S Plan is accounted for in the entity LLP which does not provide for deferred income tax asthis is the responsibility of the individual members.

If the above amounts had been recognised in the financial statements, the Group’s net assets and reserves would be as follows:

2005 2004Restated

£m £m

Net assets excluding pension prepayment (see below) 491 411Net pension liability (241) (167)

Net assets including pension liability 250 244

Members’ other interests – other reserves excluding pension prepayment (see below) 391 317Net pension liability (241) (167)

Members’ other interests – other reserves including pension liability 150 150

The £80m pension prepayment (2004 – £61m) calculated under SSAP24 has been deducted from the assets and reserves in thepreceding table, net of deferred tax.

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The following amounts would have been recognised in the financial statements in the years to 30 June 2005 and 30 June 2004under the requirements of FRS17:

2005 2004

PwC PF DH&S Plan Total PwC PF DH&S Plan Total£m £m £m £m £m £m

Operating profit:Current service cost 13 3 16 13 4 17

Other finance income:Expected return on pension scheme assets 36 18 54 30 16 46Interest on pension scheme liabilities (37) (21) (58) (34) (19) (53)

Net return (1) (3) (4) (4) (3) (7)

Statement of total recognised gains and losses (STRGL):Actual return less expected return on pension scheme assets 46 24 70 17 1 18Experience gains and losses arising on scheme liabilities (13) (7) (20) 11 9 20Changes in assumptions underlying the present value of scheme liabilities (113) (47) (160) 42 6 48

Actuarial (loss) gain recognised in STRGL (80) (30) (110) 70 16 86

Movement in deficit over the year:Deficit at beginning of year (119) (84) (203) (220) (115) (335)Service cost (13) (3) (16) (13) (4) (17)Contributions paid 24 11 35 48 22 70Other financial income (1) (3) (4) (4) (3) (7)Actuarial (loss) gain (80) (30) (110) 70 16 86

Deficit at end of year (189) (109) (298) (119) (84) (203)

Details of experience gains and losses for the year:2005 2004 2003

PwC PF DH&S Plan Total PwC PF DH&S Plan Total PwC PF DH&S Plan Total£m £m £m £m £m £m £m £m £m

Difference between the expected and actual return on scheme assets:Amount 46 24 70 17 1 18 (50) (11) (61)Percentage of scheme assets 7% 7% 7% 3% 0% 2% (11%) (4%) (9%)

Experience gains and losses arising on the scheme liabilities:Amount (13) (7) (20) 11 9 20 2 – 2Percentage of the present valueof the scheme liabilities (2%) (2%) (2%) 2% 2% 2% 0% 0% 0%

Total amount recognised in statement of recognised gains and losses:Amount (80) (30) (110) 70 16 86 (126) (58) (184)Percentage of the present valueof the scheme liabilities (10%) (7%) (9%) 11% 4% 9% (19%) (16%) (18%)

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20 Subsidiary undertakings

The consolidated financial statements report the results and financial position of the Group, including the principal subsidiaryundertakings listed below. All company shareholdings are 100% and the companies are registered in England and Wales.

Company ActivityPricewaterhouseCoopers Services Service company and employment of staffPricewaterhouseCoopers (Resources) Employment of staffPricewaterhouseCoopers (Registration) Employment of staffBarbinder Freehold Property holdingCoba Group Limited Mergers and acquisitions services

Limited Liability Partnership ActivityPricewaterhouseCoopers CI LLP, formerly the business of Professional servicesPricewaterhouseCoopers Tax & Administration Services (Channel Islands)

21 Financial Instruments

Treasury Risk ManagementThe Management Board determines the treasury function’s operating policies. These policies, designed to manage risk, relate tospecific risk areas that management wish to control including capital structure, financing, interest rate exposure and foreigncurrency exposure. The Group’s most significant treasury exposures relate to liquidity. Sensitivity to both exchange and interestrate movements is small. No speculative trading is permitted by the policies and hedging is only permitted against underlyingexposures in a manner which reduces risk.

Financial InstrumentsThe Group holds or issues financial instruments in order to finance its operations and manage foreign currency and interest raterisks arising from its operations and sources of finance. The Group requires members to provide long-term financing, includingcapital and undrawn profits. The principal financial instruments held or issued by the Group are:• Cash – The Group’s policy is to minimise the levels of cash held in order to reduce outstanding debt and maximise liquid fund

deposits. Policies to control counter party risk determine how much can be deposited with different banks in the event of acash surplus being available which cannot be utilised to reduce debt.

• Debt – The Group’s policy permits short-term variable rate facilities with a maximum facility maturity of five years and long-termfixed borrowing with a maximum maturity of ten years. The Group had no requirement for long-term borrowings at 30 June 2005.

• Certain debtors, creditors and provisions which meet the definition of a financial instrument as set out in FRS13.

Liquidity RiskThe Group manages the risk of uncertainty in its funding operations by spreading the maturity profile of its borrowings. Committedfacilities are arranged with a minimum headroom of 25% of forecast maximum debt levels. The Group’s facilities at 30 June 2005with six leading international banks amounted to £150m and are due to expire in January 2010.

Foreign currency riskThe major part of the Group’s income and expenditure is in sterling. However, some fees and costs are denominated in foreigncurrencies, mainly in connection with professional indemnity insurance and transactions with overseas PricewaterhouseCoopersmember firms. The Group seeks to minimise its exposure to fluctuations in exchange rates by hedging against net foreign currencyexposure. The Group’s policy is to enter into forward or derivative transactions as soon as economic exposures are recognised.

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21 Financial Instruments (continued)

Interest rate riskThe Group’s principal borrowings and any surplus cash balances are held at variable interest rates linked to LIBOR. Borrowingsare all undertaken in sterling reflecting the composition of the Group’s balance sheet, which includes only minor amounts of non-sterling assets and liabilities. The Group’s policy requires that asset finance be undertaken without creating significant interestrate exposure. No interest rate derivatives have been used in the year or in the prior year.

The following disclosures exclude short-term debtors and creditors, as defined in FRS13, other than the currency risk disclosures.

Liquidity and interest rate profile of financial liabilitiesThere were no material financial liabilities outstanding at 30 June 2005 (2004 – £nil).

Undrawn borrowing facilitiesUndrawn committed borrowing facilities available to the Group at 30 June 2005 totalled £150m (2004 – £128m). The currentfacilities expire in January 2010 (2004 – less than one year).

Interest rate risk profile of financial assetsThe Group held the following financial assets at 30 June 2005:

2005 2004£m £m

Sterling cash at bank and in hand 27 21Sterling short-term deposits with banks 200 44Investments in PricewaterhouseCoopers entities overseas, denominated in US dollars 6 7Other investments, all sterling and non-interest bearing – 1Long-term loan notes receivable, sterling and non-interest bearing 5 8Long-term loan notes receivable, US dollars interest bearing 1 3

239 84

The sterling cash at bank and the short-term bank deposits are held at floating rates based on LIBOR.

The investments denominated in US dollars comprise £3m (2004 – £3m) which is non-interest bearing. The remaining £3m (2004 – £4m)represents subordinated debt earning interest at a rate of 3.476%. The interest rate risk profile is shown after taking accountof any currency swaps used to manage the currency profile.

The long-term US dollar loan note receivable earns interest at 3.476%.

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Financial

21 Financial Instruments (continued)

Fair value of financial assets and financial liabilitiesSet out below is a comparison by category of book values and fair values of the Group’s financial assets and financial liabilities asat 30 June 2005. All financial instruments held or issued for trading purposes are carried in the financial statements at cost lessprovision for impairment. Fair values for investments denominated in US dollars have been calculated at year-end exchange rates.Fair values for cash and debt have been calculated by discounting expected future cash flows at prevailing interest rates andapproximate to book value owing to the short maturity of these instruments.

2005 2005 2004 2004Book value Fair value Book value Fair value

£m £m £m £m

Investments 6 6 8 7Long-term loan notes receivable 1 1 11 11Cash at bank and in hand 27 27 21 21Short-term deposits with banks 200 200 44 44Other creditors – – – –Derivative financial instruments held to manage the currency profile:Currency rate-related derivatives – see Gains and losses on hedges below – – – (2)

Currency ExposuresThe major part of the Group’s income and expenditure is in sterling. After taking into account forward contracts and known USdollar and Euro denominated debtors and liabilities, the Group had net US dollar denominated assets of £15m (2004 – £8m) andnet Euro denominated assets of £5m (2004 – £9m) at 30 June 2005.

Gains and losses on hedgesThe table below shows the extent to which the Group has off balance sheet (unrecognised) gains and losses in respect of hedgesat the beginning and end of the year. There were no on balance sheet (deferred) gains and losses in respect of hedges at thebeginning and end of the year.

Unrecognised Unrecognised Unrecognisedgains losses net gains

(losses)£m £m £m

Gains and losses at beginning of year – (2) (2)Arising in previous years included in current year profit – 2 2

Not included in current year arising in previous years – – –Arising in current year 1 (1) –

Gains and losses at end of year 1 (1) –

Of which:Gains and losses expected to be included within one year – (1) (1)Gains and losses expected to be included after one year 1 – 1

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22 Contingent liabilities

The Group’s policy with regard to claims which may arise in connection with disputes in the ordinary course of business isdescribed in note 1 on Provisions.

PricewaterhouseCoopers LLP guarantees the bank borrowings of subsidiary companies which are included in the consolidatedbalance sheet. At the year end, subsidiary company bank borrowings were nil (2004 – £nil). Apart from those guarantees, therewere no material contingent liabilities.

23 Related party transactions

PricewaterhouseCoopers LLP and PricewaterhouseCoopers United Kingdom Partnership are related parties because they are bothcontrolled by the same group of partners and the PricewaterhouseCoopers United Kingdom Partnership is the predecessor firm ofPricewaterhouseCoopers LLP. This controlling group of partners consists of all the members of PricewaterhouseCoopers LLP whoare also all the partners of PricewaterhouseCoopers United Kingdom Partnership. Related party transactions between theseparties are summarised below.

Leases not yet novated to PricewaterhouseCoopers LLPFollowing the transfer of business on establishment of the LLP on 1 January 2003, certain leases have not yet been novated to theLLP pending receipt of third party consents. Arrangements are in place for PricewaterhouseCoopers LLP to deal with these leasesfrom day to day. No charge is made for these arrangements and no amounts were due to or by PricewaterhouseCoopers LLP at30 June 2005 (2004 – £nil) under these arrangements.

Services provided in respect of client assignments to PricewaterhouseCoopers United Kingdom PartnershipArrangements are in place for PricewaterhouseCoopers LLP to supply services to PricewaterhouseCoopers United KingdomPartnership in connection with certain client assignments continuing in the partnership. For the year ended 30 June 2005PricewaterhouseCoopers LLP provided services to the PricewaterhouseCoopers United Kingdom Partnership to the value of£393,000 (2004 – £305,000) under these arrangements; all amounts were settled during the year and there were no balancesoutstanding at the year end.

Administrative support to PricewaterhouseCoopers United Kingdom PartnershipOn behalf of its members, PricewaterhouseCoopers LLP provides certain administrative services to supportPricewaterhouseCoopers United Kingdom Partnership, including the calculation of annuities and paying agent arrangements inconnection with the pension annuities due to certain former partners of the predecessor partnership. PricewaterhouseCoopers LLPcharged PricewaterhouseCoopers United Kingdom Partnership £200,000 for these support services for the year ended 30 June2005 (2004 – £200,000); which was received during the year, with no amounts outstanding at year end. Amounts paid during theyear to the annuitants on behalf of the continuing members in their capacity as partners in the predecessor partnership,PricewaterhouseCoopers United Kingdom Partnership, totalled £43m (2004 – £40m).

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Membership of thePricewaterhouseCoopersglobal networkPricewaterhouseCoopers LLP along with other member firms, is a member of PricewaterhouseCoopers InternationalLimited, a company limited by guaranteeregistered in England. Each member firmis legally separate, locally owned andlocally managed.

This configuration also reflects the factthat in most parts of the world regulatoryauthorities grant the right to practiseaccountancy to national firms in whichlocally qualified professionals have atleast majority ownership and control.

Upon joining the PricewaterhouseCoopersglobal network and becoming members of PricewaterhouseCoopers InternationalLimited, member firms have the right touse the PricewaterhouseCoopers nameand gain access to its common resources,methodologies, knowledge and expertise.

In return, each firm is bound to abideby certain common policies and maintainagreed standards. This arrangementconfers significant strengths – a coherentglobal vision combined with a robust localidentity, an understanding of both localand global markets and the responsibilitythat goes with local ownership.

Embracing consistentlyhigh standardsWe embrace the principles andpractices that create and safeguardthe quality exemplified in the

PricewaterhouseCoopers brand.These are underpinned by commonmethodologies, processes, knowledgebases and technologies, shared valuesand ethics.

We encourage the sharing of experienceand industry knowledge by applyingConnected Thinking to add value for our clients across our global network.

Contributing to the globalnetworkIn the UK we both benefit from andcontribute to the PricewaterhouseCoopersglobal network. In addition to our sharingof knowledge and expertise, AndrewRatcliffe chaired the Global Boardthroughout the year and other UKpartners fulfilled a number of roles in theglobal Leadership Team: Kieran Poynter(representing the UK territory), AmyasMorse (Operations), Paul Boorman (Tax)and Alec Jones (Industries).

Within our top 350 global accounts,35 of the audit and 33 of the non-auditclients are led by UK partners. UKpartners also contribute to the PwCnetwork Global Relationship Partnerprogramme, which develops partners to lead our very largest global clients.

Benefiting our clientsOur clients have access to industry andother specialists from across the memberfirms. The PeopleFind service, developedoriginally by the UK firm, enables us toput clients in touch with PwC specialistsfrom around the world.

The leaders of the firms in the PwCnetwork meet annually to discussstrategy and plans and reviewprogress. The 2005 meeting washeld in Beijing.

Global

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Just as we encourage diversity in our UK business to broaden our outlook andcreate better solutions for our clients, sowe benefit from participation in a networkthat truly reflects the diversity of theglobal community.

Connecting the global network

Attributes of Connected Thinking• Looking at issues from a number of angles• Understanding clients’ businesses and industries in depth and as a whole• Assessing the impact of decisions on all parties over the short and long term• Applying learning from other industries• Connecting with others who have more or different experience• Considering the ethical dimensions of our actions• Seeking help outside our offices and countries• Bringing a fresh perspective

Kieran Poynter with Sam DiPiazza, CEO of PricewaterhouseCoopers International Limited

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Offices

London

1 Embankment Place

London WC2N 6RH

Telephone: 020 7583 5000

Plumtree Court

London EC4A 4HT

Telephone: 020 7583 5000

Southwark Towers

32 London Bridge Street

London SE1 9SY

Telephone: 020 7583 5000

Aberdeen

32 Albyn Place

Aberdeen AB10 1YL

Telephone: 01224 210100

Belfast

Waterfront Plaza

8 Laganbank Road

Belfast BT1 3LR

Telephone: 028 9024 5454

Other Northern Ireland offices at

Armagh, Dungannon, Londonderry,

Omagh and Portadown.

Birmingham

Cornwall Court

19 Cornwall Street

Birmingham B3 2DT

Telephone: 0121 265 5000

Bournemouth

Hill House

Richmond Hill

Bournemouth BH2 6HR

Telephone: 01202 294621

Bristol

31 Great George Street

Bristol BS1 5QD

Telephone: 0117 929 1500

Cambridge

Abacus House

Castle Park

Gloucester Street

Cambridge CB3 0AN

Telephone: 01223 460055

Cardiff

One Kingsway

Cardiff CF10 3PW

Telephone: 029 2023 7000

East Midlands

Donington Court

Pegasus Business Park

Castle Donington

East Midlands DE74 2UZ

Telephone: 01509 604 000

Edinburgh

Erskine House

68-73 Queen Street

Edinburgh EH2 4NH

Telephone: 0131 226 4488

Gatwick

First Point

Buckingham Gate

Gatwick Airport

Gatwick

West Sussex RH6 0NT

Telephone: 01293 566 600

Glasgow

Kintyre House

209 West George Street

Glasgow G2 2LW

Telephone: 0141 248 2644

Gloucester

Lennox House

Beaufort Buildings

Spa Road

Gloucester GL1 1XD

Telephone: 01452 332200

Guernsey

National Westminster House

Le Truchot

St Peter Port

Guernsey GY1 4ND

Telephone: 01481 727777

Hull

Queen Victoria House

PO Box 88

Guildhall Road

Hull HU1 1HH

Telephone: 01482 224 111

Jersey

Twenty Two Colomberie

St Helier

Jersey JE1 4XA

Telephone: 01534 838200

Leeds

Benson House

33 Wellington Street

Leeds LS1 4JP

Telephone: 0113 289 4000

Liverpool

8 Princes Parade

St Nicholas Place

Liverpool L3 1QJ

Telephone: 0151 227 4242

Manchester

Abacus Court

6 Minshull Street

Manchester M1 3ED

Telephone: 0161 245 2000

101 Barbirolli Square

Lower Mosley Street

Manchester M2 3PW

Telephone: 0161 245 2000

Milton Keynes

Exchange House

Central Business Exchange

Midsummer Boulevard

Central Milton Keynes

MK9 2DF

Telephone: 01908 353000

Newcastle-upon-Tyne

89 Sandyford Road

Newcastle-upon-Tyne

NE99 1PL

Telephone: 0191 232 8493

Norwich

The Atrium

St Georges Street

Norwich NR3 1AG

Telephone: 01603 615244

Plymouth

Princess Court

23 Princess Street

Plymouth PL1 2EX

Telephone: 01752 267441

Reading

9 Greyfriars Road

Reading

Berkshire RG1 1JG

Telephone: 0118 959 7111

Saffron Walden

The Mill House

Wendens Ambo

Saffron Walden

Essex CB11 4JX

Telephone: 01799 544 2222

Sheffield

1 East Parade

Sheffield S1 2ET

Telephone: 0114 272 9141

Southampton

The Quay, 30 Channel Way

Ocean Village

Southampton SO14 3QG

Telephone: 023 8033 0077

Savannah House

3 Ocean Way, Ocean Village

Southampton SO14 3TJ

Telephone: 023 8033 0077

St Albans

10 Bricket Road

St Albans

Herts AL1 3JX

Telephone: 01727 844155

Swansea

Princess House

Princess Way

Swansea SA1 5LH

Telephone: 01792 473691

Uxbridge

The Atrium

1 Harefield Road

Uxbridge Middlesex UB8 1EX

Telephone: 01895 522000

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Annual R

eport 2005

Chairman 02

Clients 08

People 16

Firm 22

Financial 34

Global 70


Documents

Clients 08 People 16 Firm 22 Financial 34 Global 70 …...strategic support, risk management, outsourcing advisory. Business Recovery Corporate insolvency, solutions for discontinued